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Linear and Geometric Gradient

This document discusses arithmetic and geometric gradient series. It provides examples of calculating present worth using arithmetic and geometric formulas for different interest rates and time periods. It also includes two word problems asking the reader to calculate present worth for maintenance costs and a strip mining cash flow using given interest rates and time periods.

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Darkie Drakie
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389 views25 pages

Linear and Geometric Gradient

This document discusses arithmetic and geometric gradient series. It provides examples of calculating present worth using arithmetic and geometric formulas for different interest rates and time periods. It also includes two word problems asking the reader to calculate present worth for maintenance costs and a strip mining cash flow using given interest rates and time periods.

Uploaded by

Darkie Drakie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ARITHMETIC AND

GEOMETRIC GRADIENT
SERIES
ARITHMETIC
GRADIENT
1 SERIES
3
4
5
6
7
8
9
From Table of Interest Factors:

(P/A,12%,5) = 3.6048
(P/G,12%,5) =6.3970

10
11
P = P1 + P2
= 2 (P/G, 8%, 5) + 50 (P/A, 8%,5)
= 2 (7.3724) + 50 (3.9927)
= 214.37 K
12
P = 54 (P/A, 8%,5)
= 54 ( 3.9927)
= 215.61 K
13
14
15
16
17
18
𝑨𝒏 − 𝑨𝒎
G=
𝒏 −𝒎

19
20
21
(P/A, 10%,10) = 6.1446 (P/G,10%,10) = 22.8913

1 The Texas Highway Department expects the cost of


maintenance for a particular piece of heavy equipment to be
$5000 in year 1, $5,500 in year 2, and amounts increasing by
$500 through year 10. At an interest rate of 10% per year,
the present worth of the maintenance cost is nearest to:
(A) $38,220 (B) $42,170 (C) $46,660 (D) $51,790

22
(A/G, 12%, 8 ) = 2.9131

2 The cash flow associated with a strip mining operation


is expected to be $200,000 in year 1, $180,000 in year 2,
and amounts decreasing by $20,000 per year through 8.
At an interest rate of 12% per year, the equivalent annual
cash flow is nearest to:

(A) $61,970 (B) $142,738 (C) $185,070 (D) $261,970

24
3

(P/A, 5%, 10) = 7.7217


(P/G, 5%, 10) = 31.652
(A/G,5%,10) = 4.0991
(A/P,5%,10) = 0.12950

26
NEXT TOPIC:
GEOMETRIC
2 GRADIENT
SERIES

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