The future worth in year 10 of an arithmetic gradient cash flow series for years 1 through 10 is $500,000. If the gradient increase each year, G, is $3,000, determine the cash flow in year 1 at an interest rate of 10% per year.
What will be an ideal response?
P in year 0 = 500,000(P/F,10%,10)
= 500,000(0.3855)
= $192,750
192,750 = A + 3000(P/G,10%,10)
192,750 = A + 3000(22.8913)
A = $124,076
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