Engineering Economics Blog

An electrical engineer wants to deposit an amount   P  now such that she can withdraw an equal annual amount of  A1 = $2000 per year for the fi rst 5 years, starting 1 year after the deposit, and a different annual withdrawal of A2 = $3000 per year for the following 3 years. How would the cash fl ow diagram appear if i = 8.5% per year?
 
Solution

The cash fl  ows are shown in Figure 1–8. The negative cash outfl  ow   P  occurs now. The withdrawals (positive cash infl ow) for the A1 series occur at the end of years 1 through 5, and A2 occurs in years 6 through 8.

Figure 1–8  Cash  fl  ow diagram with two different   A  series, Example 1.10.