GEOMETRIC GRADIENT.

In the preceding section, we saw that the arithmetic gradient is applicable where the period-by-period change in a cash receiptor payment is a uniform amount. There areo ther situations where the period-by-period change is a uniformrate, g. For example, if the maintenance costs for an automobileare $100 the firstyear and they increaseat a uniformrate, g, of 10% per year, the cash flowfor the first 5 years would be as follows:

From the table, we can see that the maintenance cost in any year is