What is the capitalized worth, when i = 6% per year, of $900 per year, starting...

Question

Question

What is the capitalized worth, when i = 6% per year, of $900 per year, starting now

and continuing forever; and $9000 in year five, repeating every four years thereafter, and

continuing forever? draw the cash flow diagram if applicable.

business finance

Answer 1

Answer #1

The capitalized worth means the worth of an alternative or a project that is expected to serve for a long period of time.

Here i= 6% ie 0.06,

$900 per yr continuing forever

$9000 for 5 yr this will repeating for every four year.

Capitalized worth = present amount÷i

ie 900÷0.06 =15000

9000×0.705÷0.06 = 105750

So, 105750+15000 = 120750

Here 0.705 is the discounting fact

So the capitalized worth is 120750

And this will continue forever.

Answer 2

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