hree local government units in Metro Manila have agreed to pool their resources from taxes for the construction of a major road connecting their areas. It is estimated that an amount of P500,000 is to be deposited at the end of the year into a shared account for the first phase of the project which will last 9 years after the initial deposit has been made. The deposit will increase by P100,000 per year after the initial deposit up until the lifetime of the project. Assume 5% annual interest rate. Determine: (a) Total present worth of the deposits (b) Construct the equivalent cash flow diagram
Topic: Gradients
General Direction: Solve using Given-Required-Solution format. DO NOT USE EXCEL. Provide a Cash Flow Diagram (CFD). Use the formula given.
Three local government units in Metro Manila have agreed to pool their resources from taxes for the construction of a major road connecting their areas. It is estimated that an amount of P500,000 is to be deposited at the end of the year into a shared account for the first phase of the
project which will last 9 years after the initial deposit has been made. The deposit will increase by P100,000 per year after the initial deposit up until the lifetime of the project. Assume 5% annual interest rate. Determine:
(a) Total present worth of the deposits
(b) Construct the equivalent cash flow diagram
![Uniform Arithmetic Gradient
Key words: increase or decrease by a uniform amount each period
Ascending arithmetic progression
P = PA + PG
G[(1+ i)" – 1
PG
i
1
i
|(1+ i)"|
[1-(1+i)¯
PA = A
i
Geometric Gradient
Key words: increase / decrease by percentage
Instead of fixed value
P = A[1 - (1+ g/1+i)"]
i-g
where: P= Present of all cash flow between periods 1 and n
A = Cash flow in period 1
g= rate of change per period
i= effective interest rate per period](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F663a8350-ddb2-49bd-9368-86cbfa00f5e3%2F0aaa9b36-51bc-41f5-9e08-92e7157a1f86%2Fqtbkcjd_processed.png&w=3840&q=75)
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