Question

A set of cash flows begins at $50,000 the first year, with an increase each year until n = 20 years. If the interest rate is 396, what is the present value when (a) the annual increase is $5000 (b) the annual increase is 10%?

Answer 1

Req A:
YEAR	CASHFLOW	PVF @ 3%	PRESENT VALUE
1	50,000	0.971	48544
2	55,000	0.943	51843
3	60,000	0.915	54908
4	65,000	0.888	57752
5	70,000	0.863	60383
6	75,000	0.837	62811
7	80,000	0.813	65047
8	85,000	0.789	67100
9	90,000	0.766	68978
10	95,000	0.744	70689
11	100,000	0.722	72242
12	105,000	0.701	73645
13	110,000	0.681	74905
14	115,000	0.661	76029
15	120,000	0.642	77023
16	125,000	0.623	77896
17	130,000	0.605	78652
18	135,000	0.587	79298
19	140,000	0.570	79840
20	145,000	0.554	80283
Present value of Cash inflows			1377867
ReqB:
YEAR	CASHFLOW	PVF @ 3%	PRESENT VALUE
1	50,000	0.971	48544
2	55,000	0.943	51843
3	60,500	0.915	55366
4	66,550	0.888	59129
5	73,205	0.863	63147
6	80,526	0.837	67439
7	88,578	0.813	72022
8	97,436	0.789	76917
9	107,179	0.766	82144
10	117,897	0.744	87727
11	129,687	0.722	93689
12	142,656	0.701	100056
13	156,921	0.681	106856
14	172,614	0.661	114118
15	189,875	0.642	121873
16	208,862	0.623	130156
17	229,749	0.605	139002
18	252,724	0.587	148448
19	277,996	0.570	158537
20	305,795	0.554	169312
Present value of Cash inflows			1946324