ok thanks
I used trial and error:
PW(18%) = -130,000 - 2,000(A/G, 18%, 12) + 36,000(P/A, 18%, 12)
PW(18%) = -130,000 - 2,000(3.1936) + 36,000(4.4941)
PW(18%) = 230.642
PW(20%) = -130,000 - 2,000(A/G, 20%, 12) + 36,000(P/A, 20%, 12)
PW(20%) = -130,000 - 2,000(3.0739) + 36,000(4.1925)
PW(20%) = -5,112.33
Using Linear Interpolation:
i=18% --> 230.642
x% --> 0
i=20% --> -5,112.33
(18%-x%)/(18%-20%) = (230.642-0)/(230.642-(-5,122.33))
(0.18-x%)/(-0.02) = 0.061984
0.18 - x% = 0.00124
0.18 + 0.00124= x%
x% = 0.18124 or 18.12 %
I'm not sure if the equation for the PW is right based on the cash flows described in the question.
Last edited by 0xCMD; June 29th, 2009 at 09:52 AM.
Reason: Correcting equations, making them more clear.
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