Calculate the present, future, and equivalent annual value.
Explanation of Solution
Equivalent cash flow (CF1) from year 1 to 5 is -$100. Time period 1 (n1) is 5. Interest rate 1 (i1) is 14%. Equivalent cash flow (CF2) from year 6 to 8 is -$160. Interest rate 2 (i2) is 10%. Time period 2 (n2) is 3.
Present value (P) can be calculated as follows:
Present value is -$549.98.
Future value is -$1,409.4.
Equivalent annual value (A) can be calculated as follows:
Equivalent annual value is -$116.4.
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