## Problem 5-62**Task:**Compute the present value, $ P $, for the following cash flows (assume the series repeats forever).**Diagram Explanation:**This diagram represents a timeline of cash flows with specific values occurring at designated time intervals, and the series is assumed to repeat indefinitely. The cash flows are as follows:- At year 6: $400- At year 7: $300- At year 8: $200- At year 9: $1000These cash flows repeat every four years starting again at year 10, where:- At year 10: $400- At year 11: $300- At year 12: $200- At year 13: $1000The interest rate, $ i $, is given as 8%.The diagram indicates that this pattern of cash flows will continue indefinitely, which defines a perpetuity situation in finance where the cash flows persist forever.**Objective:**To calculate the present value, $ P $, of this perpetuity series by taking into account the repeated cash flow amounts and the specified interest rate.

Cash flow outwardly addresses pay and costs throughout some time intervals. The diagram comprises an even line with markers at a progression of time spans. At suitable times, costs and expenses are shown.

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Compute the present value, P, for the following cash flows (assume series repeats forever). 1000 1000 400, 300 200 400 300 200 0--2–3–4–5–6–1–8–ġ–i0-11–12–13– i = 8%

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

## Problem 5-62

**Task:**
Compute the present value, $ P $, for the following cash flows (assume the series repeats forever).

**Diagram Explanation:**

This diagram represents a timeline of cash flows with specific values occurring at designated time intervals, and the series is assumed to repeat indefinitely. The cash flows are as follows:

- At year 6: $400
- At year 7: $300
- At year 8: $200
- At year 9: $1000

These cash flows repeat every four years starting again at year 10, where:
- At year 10: $400
- At year 11: $300
- At year 12: $200
- At year 13: $1000

The interest rate, $ i $, is given as 8%.

The diagram indicates that this pattern of cash flows will continue indefinitely, which defines a perpetuity situation in finance where the cash flows persist forever.

**Objective:**
To calculate the present value, $ P $, of this perpetuity series by taking into account the repeated cash flow amounts and the specified interest rate.

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