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Gradient Series of Cash Flows

UNIFORM GRADIENT SERIES OF CASH FLOWS


Arithmetic gradient series is a series of payments in
which each payment is greater than or less than previous
one by a constant amount

GEOMETRIC SERIES OF CASH FLOWS


Geometric gradient series is series of payments where
annual payments increase or decrease over time, by a
constant percentage.
1. Find the value of each of the following:
a. (A/G, 14.5%,23)
b. (P/G, 12%,10)
c. (F/G,7.8%,21)
2. Compute for the present value

150
100
50
0

0 1 2 3 4

i= 10%
3. Compute the value of the amount of F
200
150
100
50

0 1 2 3 4
i= 10%

4. Compute the value of the amount of A


400
300
200
100
0
0 1 2 3 4 5
i= 10%
5. For the gradient series shown below, compute for
the values of P and F and the value of A
500
450
400
350
300 250

0 1 2 3 4 5 6
i= 10%
6. Suppose a man receives an initial annual salary of
$60,000, increasing at the rate of $5,000 a year. If
money is worth 10%, determine his equivalent
uniform salary for the period of 8 years.
7. Deposit are made to an account as indicated below
which bears interest at the rate of 10% compounded
annually. How much will there be in the account the
end of the sixth year?

End of year Deposit


1 P0
2 500
3 1000
4 1500
5 2000
8. An increasing annual uniform series begins at
the end of second year and ends after
fifteenth year. What is the value of gradient G
that makes the gradient series equivalent to a
uniform flow of payments of Php 900 per year
for seven years at 12% per year compounded
annually?
Geometric Gradient

The rate of increase is (1+r )


1. For the cash flow shown below, find the values of
present and future if i = 12% per year
1464.10
1210 1331
1000 1100
0

r = 10% i= 12%
2. For the cash flow shown below, find the values
of present and future if i = 12% per year

3000
2250
1687.50
1265.63
949.22
711.91
533.94
400.45

0 1 2 3 4 5 6 7 8
3. Annual maintenance cost for the machine
are 1,500 this year and estimated to increase
10% each year every year. What is the
present worth of the maintenance cost for 6
years if i= 8%
4. Lovely a 3rd year student of Industrial Engineering
Department in Adamson University with a age of 18
years old makes year end deposit of Php 500 for the
first year, P 550 on the 2nd year, P 605 on the 3rd year
and so on, increasing the next year’s deposit by 10%
of the deposit by the preceding year until the end of
tenth year. Desiree makes equal year end deposits of
700 each year for 10 years. If interest on both funds is
12% compounded annually, who will be able to save
more at the end of 10 years?
5. On Domingo’s 23rd birthday you decide to invest
$4,500 (10% of your annual salary) in a mutual
fund earning 7% per year. You will continue to
make annual deposits equal to 10% of your
annual salary until you retire at age 62 (40 years
after you started your job). You expect your salary
to increase by an average of 4% each year during
this time. How much money will you have
accumulated in your mutual fund when you retire?

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