04. Time Value of Money_2aaaaaaaaaaaaa.pptx

Time Value of Money 2

1. Time Value of Money (2) Hakimul Batih MTE 0101 Ekonomi Energi Ketenagalistrikan dan Efisiensi Magister Teknik Elektro Institut Teknologi PLN (IT PLN)

2. Uniform Series C ompound Interest F ormulas Many times we will find uniform series of receipts or disbursements. Automobile loans, house payments, and many other loans are based on a uniform payment series. F = P (F/P, i, n)

3. Uniform Series C ompound Interest F ormulas

4. Uniform Series C ompound Interest F ormulas

5. Uniform Series C ompound Interest F ormulas

6. Uniform Series C ompound Interest F ormulas

7. Arithmetic Gradient It frequently happens that the cash flow series is not of constant amount A. Instead, there is a uniformly increasing series as shown:

8. Arithmetic Gradient Cash flows of this form may be resolved into two components: P = P’ + P’’ = A(P/A, i , n) + G(P / G, i , n)

9. Arithmetic Gradient arithmetic gradient present worth factor : arithmetic gradient uniform series factor :

10. 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 are other situations where the period-by-period change is a uniform rate, g . For example, if the maintenance costs for an automobile are $100 the first year and they increase at a uniform rate, g, of 10% per year, the cash flow for the first 5 years would be as follows:

11. Geometric Gradient geometric series present worth factor where i ≠ g . In the special case of i =g

12. Present Worth Analysis One of the easiest ways to compare mutually exclusive alternatives is to resolve their consequences to the present time

13. Present Worth Analysis T wo different analysis-period situations are encountered in economic analysis problems: 1. The useful life of each alternative equals the analysis period. 2. The alternatives have useful lives different from the analysis period.

14. The useful life of each alternative equals the analysis period

15. The alternatives have useful lives different from the analysis period