Answer to Question #230411 in Finance for Henok Gezahaegn

Question

The following question describes the conversion of cash flow into an equivalent equal payment series with N = 10

A = [800+200(A/G, 6%, 7)] (P/A, 6%, 10) + [300(F/A, 6%, 3) – 500] (A/F, 6%, 10)

Given the equation, reconstruct the original cash flow diagram and calculate the value of A

Answer 1

From the factor table;

(A/G, 6%, 7)=13.9

P/A, 6%, 10=7.39

F/A, 6%, 3 = 3.18

A/F, 6%, 10 = 0.0759

Therefore$A = {800 +200(13.9*7.39)} + [{(300*3.18)-500}*0.0759}]$

A= 21378.66

Cash flow diagram