Given a cash flow stream X = (x0, x1,x2,...,xn), a new stream X of infinite length...

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Given a cash flow stream X = (x0, x1,x2,...,xn), a new stream X∞ of infinite length is made by successively repeating the corresponding finite stream. The interest rate is r. Let P and A be the present value and the annual worth, respectively, of stream X. Finally, let Po be the present value of stream X. Find A in terms of P and conclude that A can be used as well as Poo for evaluation purposes. Given a cash flow stream X = (x0, x1,x2,...,xn), a new stream X∞ of infinite length is made by successively repeating the corresponding finite stream. The interest rate is r. Let P and A be the present value and the annual worth, respectively, of stream X. Finally, let Po be the present value of stream X. Find A in terms of P and conclude that A can be used as well as Poo for evaluation purposes.

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We will derive the formula for A in terms of P First lets express the present value P ... View the full answer