Problem
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?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.