2. refer to the two cash flow diagrams below. if f1 and f2 are the corresponding future worth values of…

2. refer to the two cash flow diagrams below. if f1 and f2 are the corresponding future worth values of equal uniform periodic cash flows a, then\n\na. not enough information to determine\nb. f1 = f2\nc. f1 < f2\nd. f1 > f2

2. refer to the two cash flow diagrams below. if f1 and f2 are the corresponding future worth values of equal uniform periodic cash flows a, then\n\na. not enough information to determine\nb. f1 = f2\nc. f1 < f2\nd. f1 > f2

Answer

Explanation:

Step1: Calculate F1

The future - worth formula for a cash - flow is $F = A(1 + i_1)(1 + i_2)+A(1 + i_2)+A$. For the first cash - flow diagram with $i_1 = 4%=0.04$ and $i_2 = 8% = 0.08$, we have $F1=A(1 + 0.04)(1 + 0.08)+A(1 + 0.08)+A=A(1.04\times1.08 + 1.08+1)=A(1.1232+1.08 + 1)=A(3.2032)$.

Step2: Calculate F2

For the second cash - flow diagram with $i_1 = 8%=0.08$ and $i_2 = 4% = 0.04$, we have $F2=A(1 + 0.08)(1 + 0.04)+A(1 + 0.04)+A=A(1.08\times1.04 + 1.04+1)=A(1.1232+1.04 + 1)=A(3.1632)$.

Step3: Compare F1 and F2

Since $3.2032>3.1632$, then $F1>F2$.

Answer:

D. F1 > F2