Class 7 9-12

# Class 7 9-12 - Class 7 Uniform Gradients ISE 2014 Click to...

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Click to edit Master subtitle style Class 7 – Uniform Gradients ISE 2014 Fall 2011

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Your Toolbox Cash Flow Diagrams F/P P/F P/A
Today’s Goal Today we’re going learn about uniform gradients, and add two tools to our toolbox for dealing with them Some problems of Homework 3 deal with uniform gradients, and some of Homework 4 will as well

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What is a uniform Lets look at it visually first, then describe what we see 0 1 2 3 4 5 6 7 8 9 \$10 0 \$20 0 \$30 0 \$40 0 \$50 0 \$60 0 i = 5%
Uniform Gradient First, it’s a series of cash flows that occur on consecutive periods Second, the values of those cash flows increase or decrease by a constant amount each period Third, a gradient can start at any value and begin increasing or decreasing, not just zero

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Gradient Tools We have two tools for manipulating gradients, P/G and A/G The P/G tool allows us to find an equivalent present value given our gradient The A/G tool allows us to find an equivalent annuity given our gradient These tools are tricky with their N values, lets practice on the previous diagram
Even though our first cash flow is \$100 in year 4, we consider the gradient to “start” in year 3 with a value of \$0

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Class 7 9-12 - Class 7 Uniform Gradients ISE 2014 Click to...

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