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A contract has been signed to lease a building at P20,000 per year with annual increase of P1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now, the prevailing rate is 7%. What lump sum paid today would be equivalent to the 8-year lease plan?

A contract has been signed to lease a building at P20,000 per year with annual increase of P1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now, the prevailing rate is 7%. What lump sum paid today would be equivalent to the 8-year lease plan?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A contract has been signed to lease a building at P20,000 per year with annual increase of P1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now, the prevailing rate is 7%. What lump sum paid today would be equivalent to the 8-year lease plan?
Transcribed Image Text:A contract has been signed to lease a building at P20,000 per year with annual increase of P1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now, the prevailing rate is 7%. What lump sum paid today would be equivalent to the 8-year lease plan?
ARITHMETIC GRADIENT P = PA+ Pg 1- (1+i)¯n G[1- (1+i)¯" n P = A i i i (1 + i)" P = value or sum of money at present of gradient F= value or sum of money at future of gradient A = the base amount or a series of periodic equal amounts of money n = the number of interest periods i= interest rate per interest period G = arithmetic gradient change Where:
Transcribed Image Text:ARITHMETIC GRADIENT P = PA+ Pg 1- (1+i)¯n G[1- (1+i)¯" n P = A i i i (1 + i)" P = value or sum of money at present of gradient F= value or sum of money at future of gradient A = the base amount or a series of periodic equal amounts of money n = the number of interest periods i= interest rate per interest period G = arithmetic gradient change Where:
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