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Consider a series of end-of-period CFs spanning 2041-2055, which increase by a fixed amount each period....

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Finance

Consider a series of end-of-period CFs spanning 2041-2055, whichincrease by a fixed amount each period. The amount of the first CFin the series is $148 and the increment is $56. The interest rateis 0.5%. What is the equivalent uniform amount for a series ofend-of-year CFs spanning the same time period?

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4.0 Ratings (665 Votes)

0.5000%
Cash flows Year Discounted CF
                           -   0 0.00
                 148.00 1 147.26
                 204.00 2 201.98
                 260.00 3 256.14
                 316.00 4 309.76
                 372.00 5 362.84
                 428.00 6 415.38
                 484.00 7 467.39
                 540.00 8 518.88
                 596.00 9 569.84
                 652.00 10 620.28
                 708.00 11 670.20
                 764.00 12 719.62
                 820.00 13 768.520
                 876.00 14 816.919
                 932.00 15 864.819

Value of cash flow at the beginning of 2041 = 7,709.82 (we have assumed first cash flow at the end of 2041)

PV = 7,709.82

FV = 0

rate = 0.5%

N = 15

use PMT function in Excel

equivalent uniform amount = 534.79
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Transcribed Image Text

Consider a series of end-of-period CFs spanning 2041-2055, whichincrease by a fixed amount each period. The amount of the first CFin the series is $148 and the increment is $56. The interest rateis 0.5%. What is the equivalent uniform amount for a series ofend-of-year CFs spanning the same time period?

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