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Homework answers / question archive / 1) In an (A+G) series where A= 500 and G=50, the first cash flow of the A series is 500 and of the G series is: O 550 0 50

1) In an (A+G) series where A= 500 and G=50, the first cash flow of the A series is 500 and of the G series is: O 550 0 50

Economics

1) In an (A+G) series where A= 500 and G=50, the first cash flow of the A series is 500 and of the G series is: O 550 0 50.

2)For the following cashflows, which of the following relationships is correct? Year o -$300 Year 1 80 Year 2 120 Year 3 160 Year 4 200 O 300 - 80(P/A,1,4) + 40(P/G,1,4) O 300 - 80(P/A,i,4) + 40(P/F,1,3) O 300 - 80(P/A,1,3) + 40(P/F,i,4) O 300 - 80(P/A,i,4) + 40(P/G,1,3)

 

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Answer
A) 550

A is the base amount and G(Gradient) is the amount by which a cash flow is increasing every time ,
First time the cash flow is 500
Second time 550
Thirs time 600 and so on .

2)The net present value of the cash flow can be expressed mathematically as follows

As we can see the first payment is $ 80 and the amount increases by $ 40 each year. Therefore, this is arithmetic trading.

First option is correct.

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