Interest Formulas for Single Cash Flows Lecture No

  • Slides: 11
Download presentation
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 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. All Rights Reserved

Singe Cash Flow Formula Compound Amount Factor Contemporary Engineering Economics, 6 e, GE Park

Singe Cash Flow Formula Compound Amount Factor Contemporary Engineering Economics, 6 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. All Rights Reserved

Single Cash Flow Formula Present Worth Amount Factor Contemporary Engineering Economics, 6 e, GE

Single Cash Flow Formula Present Worth Amount Factor Contemporary Engineering Economics, 6 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. 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 e, GE Park Copyright © 2016, Pearson Education, Ltd. All Rights Reserved