Question

An arithmetic cash flow gradient series equals $800 in year 1, $900 in year 2, and amounts increasing by $100 per year through year 11. At i = 8% per year, determine the present worth of the cash flow series in year 0.

Answer 1

Present worth of the cash flows is computed as follows.

PV Factor at year N = (1.08)^-N

Year	Cash Flow ($)	PV Factor @8%	Discounted Cash Flow ($)
	(A)	(B)	(A) x (B)
1	800	0.9259	740.74
2	900	0.8573	771.60
3	1,000	0.7938	793.83
4	1,100	0.7350	808.53
5	1,200	0.6806	816.70
6	1,300	0.6302	819.22
7	1,400	0.5835	816.89
8	1,500	0.5403	810.40
9	1,600	0.5002	800.40
10	1,700	0.4632	787.43
11	1,800	0.4289	771.99
		Present Worth ($) =	8,737.74