Question

Find the value of the unknown quantity Z in the following diagram, such that the equivalent cash outflow equals the equivalent cash inflows when r-20% compounded continuously: A $470/year Years The unknown quantity is -(Round to the nearest dollar.)

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Answer #1
Year Cash inflows PVF at 20% Present value
1 0 0.833333 0
2 0 0.694444 0
3 Z 0.578704 0.5787 Z
4 0 0.482253 0
5 470 0.401878 188.8825
6 470 0.334898 157.402
7 470 0.279082 131.1684
8 470 0.232568 109.307
9 470 0.193807 91.08915
Present value of Inflows 677.85 +0.5787 Z
Present value of outflows in Year-0 = Z
As per question, present value of inflowws and outflows is equal. Hence, the equation is as under:
Z = 677.85 +0.5787 Z
Z = 1608.95
Answer is $ 1608.95
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