) Determine the value of Q for the two cash flows to be equivalent. Assuminga 6% annual interest rate.20400800year134124

Answered: ) Determine the value of Q for the two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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) Determine the value of Q for the two cash flows to be equivalent. Assuming
a 6% annual interest rate.
20
400
800
year
1
3
4
1
2
4

Expert Solution

Step 1

The present worth of a sum of money refers to the current value of the money that one is going to receive as series of cash flows in future. It is calculated as follows:

$P r e s e n t W o r t h = c_{0} + \frac{c_{1}}{{(1 + i)}^{1}} + \frac{c_{2}}{{(1 + i)}^{2}} + . . . . . . \frac{c_{n}}{{(1 + i)}^{n}}$

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