Equivalent cash flows are those that have the same value and the
calculated expression of equivalence can be used as a basis for choice.
A sum of birr 300 in the present is equivalent to:
0 1 2 3 4 5 6 7
Years 0 1 2 3 4 5 6 7
Years
Equivalent cash flows at 15%
2.Equivalence can be established at any point in time .
9. A first year DEC student needs a sum of birr. 20,000 for his
marriage which will take place 6 years from now. Find the amount
of money that he should deposit now in a bank if the bank gives
5.5% interest, compounded annually.
10. A person who is just 30 years old is planning for his retired life.
He plans to invest an equal sum of birr 10,000 at the end of every
year for the next 30 years starting from the end of next year. The
bank gives 5.5% interest rate, compounded annually. Find the
maturity value of his account when he is 60 years old.