Skip to main content

Find A from cash flow with 25000, 5A, 10000

Short answer

Set present worth of receipts equal to outflows: A[1+(P/A,15%,6)] + 10000(P/F,15%,15) = 25000 + 5A(P/F,15%,10). Solving gives A = Rs 6,698.79.

Find the value of A if i = 15%. [Figure: outflow of 25000 at year 0; uniform receipts A at years 0 to 6 (seven arrows); outflow of 5A at year 10; receipt of 10000 at year 15]

Reading the diagram

Year 0: outflow 25,000 and a receipt A (uniform series of seven receipts A at years 0 to 6). Year 10: outflow 5A. Year 15: receipt 10,000. Equivalence at i = 15% means PW of receipts = PW of outflows.

 receipts : A A A A A A A (yr 0-6)         10,000 (yr 15)
 outflows : 25,000 (yr 0)        5A (yr 10)

Factors (i = 15%)

  • (P/A, 15%, 6) = 3.7845
  • (P/F, 15%, 10) = 0.2472
  • (P/F, 15%, 15) = 0.1229

Equation

A + A (P/A, 15%, 6) + 10,000 (P/F, 15%, 15) = 25,000 + 5A (P/F, 15%, 10)

  • A (1 + 3.7845) + 10,000 × 0.1229 = 25,000 + 5A × 0.2472
  • 4.7845 A + 1228.94 = 25,000 + 1.2359 A
  • (4.7845 − 1.2359) A = 25,000 − 1228.94
  • 3.5486 A = 23771.06

Answer: A = Rs 6,698.79.

✓ Answer checked by Claude Opus 5.5 (high effort)

All Engineering Economics chapter 2 questions →