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The business plan for Knowlt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $310,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? The interest rate used in the calculation was 10.60 ± 2% %. Explanation $400,000 = 310000 + $50,000(A/G, i, n) $400,000 = 310000+ $50,000(A/G, i, 5) (A/G, i, 5) = 1.800 Interpolate using interest tables or use Excel's Goal Seek, or Solver functions. i = 10.6%

The business plan for Knowlt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $310,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? The interest rate used in the calculation was 10.60 ± 2% %. Explanation $400,000 = 310000 + $50,000(A/G, i, n) $400,000 = 310000+ $50,000(A/G, i, 5) (A/G, i, 5) = 1.800 Interpolate using interest tables or use Excel's Goal Seek, or Solver functions. i = 10.6%

Economics Today and Tomorrow, Student Edition
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter6: Saving And Investing
Section6.1: Why Save?
Problem 6R
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The business plan for Knowlt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $310,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? The interest rate used in the calculation was 10.60 ± 2% %. Explanation $400,000 = 310000 + $50,000(A/G, i, n) $400,000 = 310000+ $50,000(A/G, i, 5) (A/G, i, 5) = 1.800 Interpolate using interest tables or use Excel's Goal Seek, or Solver functions. i = 10.6%
Transcribed Image Text:The business plan for Knowlt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $310,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? The interest rate used in the calculation was 10.60 ± 2% %. Explanation $400,000 = 310000 + $50,000(A/G, i, n) $400,000 = 310000+ $50,000(A/G, i, 5) (A/G, i, 5) = 1.800 Interpolate using interest tables or use Excel's Goal Seek, or Solver functions. i = 10.6%
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