Question: Calculate the EUAB over a 6 year period of two payments - one of $20,000 in year 2 and another of $10,000 in year 4. The Equivalent Uniform Annual Benefit is the amount of evenly distributed yearly payments that would generate the same present or future value. Use i = 6% and show calculations.
- Draw the Cash Flow Diagram:
- Calculate the Future value F of the two payments in year 6.
- Calculate the value of 6 equal annual payments that will equal F (A given F). This is the EUAB.
- Calculate the Present value P of the two payments in year 0.
- Calculate the value of 6 equal annual payments that will equal F (A given F). Confirm this is the same EUAB.