Find the equivalent annual worth of the cash flow diagram.
Answer to Problem 17P
The equivalent annual worth of the cash flow diagram is
Explanation of Solution
Given data:
The normal interest rate
Formula used:
Formula to calculate the annual worth for the given cash flow diagram is,
Here,
Refer the Problem 20.17 Figure in the textbook, the equation (1) is rewritten with respect to the given number of years is,
Formula to calculate the present cost for the given uniform series payment is,
Formula to calculate the uniform series payment for the given present cost is,
Formula to calculate the present cost for the given future cost is,
Formula to calculate the uniform series payment for the given future cost is,
Calculation:
To calculate the equivalent annual worth of the cash flow diagram:
Substitute
Substitute
Substitute
Substitute
Substitute
Substitute
Substitute
Therefore, the equivalent annual worth of the cash flow diagram is
Conclusion:
Thus, the equivalent annual worth of the cash flow diagram is
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