## Consider the following two cash flow series of payments: Series A is a geometric series increasing at a rate of 9.5% per year. The initial c

Question

Consider the following two cash flow series of payments: Series A is a geometric series increasing at a rate of 9.5% per year. The initial cash payment at the end of year 1 is $1,000. The payments occur annually for 5 years. Series B is a uniform series with payments of value X occurring annually at the end of years 1 through 5. You must make the payments in either Series A or Series B. a. Determine the value of X for which these two series are equivalent if your TVOM is i = 9%.$
b. If your TVOM is 8%, would you be indifferent between these two series of payments? Enter the PW for each series to support this choice.
c. If your TVOM is 5%, would you be indifferent between these two series of payments? Enter the PW for each series to support this choice.

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3 years 2021-08-27T07:57:25+00:00 1 Answers 5 views 0

Step-by-step explanation:

From the given information;

The present value of series A:

Thus, the present value of series A is = $4629 Present value of series A = Present value of series B Thus, the value of X =$1189.97

2.

The present value of series A:

Thus, the present value of series A is = $4761 Present value of series B = Thus, the present value of series B =$4750

3.

The present value of series A:

Thus, the present value of series A = $5188 Present value of series B: = Thus, the present value of series B =$5153