Question: Consider an EOY geometric gradient, which lasts for eight years, whose initial value at EOY one is $5,000 and = 6% per year thereafter. Find the equivalent uniform gradient amount over the same period if the initial value of the cash flows at the end of year one is $4,000. Complete the following questions to determine the value of the gradient amount, G. The interest rate is 8% per year.
a. What is P0 for the geometric gradient series?
b. What is P′0 of the uniform (arithmetic) gradient of cash flows?
c. What is the value of G?