Answer:
cash flow third year: 23,212
Explanation:
the economic equivalent value means the third payment will make the project equal to 50,000 today at 5% discount rate.
It mill make both option equivalent.
So the present value of the three payment will be 50,000.
We will calculate each PV:
<em>First year:</em>
Nominal: 10,000.00
time 1 year
rate 5% = 0.05
PV 9,523.81
<em>Second Year:</em>
Nominal: 15,000.00
time 2 years
rate 0.05
PV 13,605.44
<em>Now, we go back to our previous formula:</em>
50,000 = 9,523.81 + 13,605.44 + PV3
<u>And solve for PV of third year:</u>
PV3 = 26,870.75
Now we go into the formula for PV and solve for the nominal
<em>Third Year:</em>
Nominal: N
time 3 years
rate 0.05
PV 26,870.75
N = 23211.96415
The third year cash inflow should be for this amount to made the project economic equivalent
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