Interest Formulas for Single Cash Flows Lecture No

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Interest Formulas for Single Cash Flows Lecture No. 6 Chapter 3 Contemporary Engineering Economics

Interest Formulas for Single Cash Flows Lecture No. 6 Chapter 3 Contemporary Engineering Economics Copyright © 2016 Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Types of Common Cash Flows in Engineering Economics q Single cash flow q Equal

Types of Common Cash Flows in Engineering Economics q Single cash flow q Equal (uniform) payment series at regular intervals q Linear gradient series q Geometric gradient series q Irregular (random) payment series Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Equivalence Relationship Between P and F q. Compounding Process q. Finding an equivalent future

Equivalence Relationship Between P and F q. Compounding Process q. Finding an equivalent future value of a current cash payment q Discounting Process q. Finding an equivalent present value of a future cash payment Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Singe Cash Flow Formula Compound Amount Factor Contemporary Engineering Economics, 6 th edition Park

Singe Cash Flow Formula Compound Amount Factor Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Example 3. 7: Find F, Given i, N, and P q. Given: P =

Example 3. 7: Find F, Given i, N, and P q. Given: P = $2, 000, i = 10%, N = 8 years q Excel Solution q. Find: F Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

A Typical Compound Interest Table at 12% To find the compound interest factor when

A Typical Compound Interest Table at 12% To find the compound interest factor when the interest rate is 12% and the number of interest periods is 10, we could evaluate the following equation using the interest table. Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Single Cash Flow Formula Present Worth Amount Factor Contemporary Engineering Economics, 6 th edition

Single Cash Flow Formula Present Worth Amount Factor Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Example 3. 8: Find P, Given i, N, and F q. Given: F =

Example 3. 8: Find P, Given i, N, and F q. Given: F = $1, 000, i = q. Excel Solution 12%, N = 5 years q. Find: P Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Example 3. 9: Find i, Given P, F, and N q. Given: F =

Example 3. 9: Find i, Given P, F, and N q. Given: F = $20, P = $10, N = 5 years q. Find: i • Cash Flow Diagram q Excel Solution Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Example 3. 10: Find N, Given P, F, and i q. Given: P =

Example 3. 10: Find N, Given P, F, and i q. Given: P = $6, 000, F = $12, 000, i = 20% q. Find: N • Solving for N q Excel Solution Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved

Rule of 72 q. Approximating how long it will take for a sum of

Rule of 72 q. Approximating how long it will take for a sum of money to double • Number of Years Required to Double an Initial Investment at Various Interest Rates Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved