Consider an EOY geometric gradient, which lasts for eight years, whose initial value at EOY one is $5,000 and f = 6% per year thereafter. Find the equivalent uniform gradient amount over, the same period if the initial value of the cash flows at the end of year one is $4,000. Complete the following questions to determine the value of the gradient amount, G. The interest rate is 8% per year.
a. What is P0 for the geometric gradient series?
b. What is P’0 of the uniform (arithmetic) gradient of cash flows?
c. What is the value of G?
A pump is required for 10 years at a remote location. The pump can be driven by an electric motor if a power line is extended to the site. Otherwise, a gasoline engine will be used. Use an annual cash flow analysis to determine, based on the following data and a 10% interest rate, how the pump should be powered.
