1. Consider the following cash flow payments: An income of $2000 at the end of year 2, an income of $5000 at the end of year 4, an expense of $3000 at the end of year 8, and a final income of $4000 at the end of year 10. • Draw the cash flow diagram for the cash flow payments. • Write an expression: what is the present equivalent value of these payments over the 10-year period assuming an interest rate of 10% per year. Just write down the expression like "e.g. P = 1,000 (P/F, 4%, 10) + 2,500 (P/A, 4%, 5) –4,000". You don't need to calculate the final numerical answer. (Hint: you can write out the present equivalent value for each cash flow, and then sum them up.)
1. Consider the following cash flow payments: An income of $2000 at the end of year 2, an income of $5000 at the end of year 4, an expense of $3000 at the end of year 8, and a final income of $4000 at the end of year 10. • Draw the cash flow diagram for the cash flow payments. • Write an expression: what is the present equivalent value of these payments over the 10-year period assuming an interest rate of 10% per year. Just write down the expression like "e.g. P = 1,000 (P/F, 4%, 10) + 2,500 (P/A, 4%, 5) –4,000". You don't need to calculate the final numerical answer. (Hint: you can write out the present equivalent value for each cash flow, and then sum them up.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:1. Consider the following cash flow payments:
An income of $2000 at the end of year 2, an
income of $5000 at the end of year 4, an
expense of $3000 at the end of year 8, and a
final income of $4000 at the end of year 10.
• Draw the cash flow diagram for the cash
flow payments.
• Write an expression: what is the present
equivalent value of these payments over the
10-year period assuming an interest rate of
10% per year.. Just write down the
expression like "e.g. P = 1,000 (P/F, 4%, 10) +
2,500 (P/A, 4%, 5) -4,000". You don't need to
calculate the final numerical answer. (Hint:
you can write out the present equivalent
value for each cash flow, and then sum them
up.)
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