**D-80** The interest rate that makes Alternatives A and B equivalent is in what range?This question is related to financial analysis, where determining the equivalent interest rate is crucial for comparing different investment alternatives. Understanding the concept of equivalence is essential for making informed decisions regarding investments or financial projects. ### Cash Flow AnalysisThe table below presents the cash flow series for two alternatives, Alt. A and Alt. B, over a period of five years. It includes initial investments and annual cash inflows for each option.| Year | Alt. A | Alt. B ||------|--------|--------|| 0 | -$1000 | -$3000 || 1 | 100 | 500 || 2 | 100 | 550 || 3 | 100 | 600 || 4 | 200 | 650 || 5 | 200 | 700 |**Questions:**(a) Is the interest rate less than 2%?(b) Is the interest rate between 2% and 5%?(c) Is the interest rate greater than 5%?(d) Is there no interest rate that equates these two cash flow series?

The nominal interest rate can be nay declared or given rate of interest. It is also known as the…

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D-80 The interest rate that makes Alternatives A and B equivalent is in what range?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

### Cash Flow Analysis

The table below presents the cash flow series for two alternatives, Alt. A and Alt. B, over a period of five years. It includes initial investments and annual cash inflows for each option.

| Year | Alt. A | Alt. B |
|------|--------|--------|
| 0 | -$1000 | -$3000 |
| 1 | 100 | 500 |
| 2 | 100 | 550 |
| 3 | 100 | 600 |
| 4 | 200 | 650 |
| 5 | 200 | 700 |

**Questions:**

(a) Is the interest rate less than 2%?

(b) Is the interest rate between 2% and 5%?

(c) Is the interest rate greater than 5%?

(d) Is there no interest rate that equates these two cash flow series?

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