lecture no.7 chapter 3 contemporary engineering economics copyright © 2010 contemporary engineering...
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Lecture No.7Chapter 3
Contemporary Engineering EconomicsCopyright © 2010
Contemporary Engineering Economics, 5th edition, © 2010
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Equal Payment Series
Contemporary Engineering Economics, 5th edition, © 2010
0 1 2 N
0 1 2 N
A A A
F
P
0 N
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Equal-Payment Series Compound Amount FactorFormula
Contemporary Engineering Economics, 5th edition, © 2010
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Contemporary Engineering Economics, 5th edition, © 2010
An Alternate Way of Calculating the Equivalent Future Worth, F
0 1 2 N 0 1 2 N
A A A
F
A(1+i)N-1
A(1+i)N-2
A
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Example 3.14 Uniform Series: Find F, Given i, A, and N
Given: A = $3,000, N = 10 years, and i = 7% per year
Find: F
Excel Solution:
Contemporary Engineering Economics, 5th edition, © 2010
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Example 3.15 Handling Time Shifts: Find F, Given i, A, and N
Given: A = $3,000, N = 10 years, and i = 7% per year
Find: F
Excel Solution:
Contemporary Engineering Economics, 5th edition, © 2010
o Each payment has been shifted to one year earlier, thus each payment would be compounded for one extra year
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Sinking-Fund Factor: Find A, Given i, N, and F
Given: F = $5,000, N = 5 years, and i = 7% per year
Find: A
Excel Solution:
Contemporary Engineering Economics, 5th edition, © 2010
Formula – Sinking Fund Factor
$5,000( / ,7%,5)$869.50
A A F
$5,000
A
0 51
=PMT(7%,5,0,5000)
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Example 3.17 Comparison of Three Different Investment Plans
Given: Three investment plans and i = 8% Find: Balance on the 65th birthday
Contemporary Engineering Economics, 5th edition, © 2010
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How Long Would It Take to Save $1 Million?
Contemporary Engineering Economics, 5th edition, © 2010
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Example 3.18 Uniform Series: Find A, Given P, i, and N
Given: P = $250,000, N = 6 years, and i = 8% per year Find: A Formula to use:
Excel Solution:
Contemporary Engineering Economics, 5th edition, © 2010
Capital Recovery Factor
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Example 3.19 – Deferred Loan Repayment
Given: P = $250,000, N = 6 years, and i = 8% per year, but the first payment occurs at the end of year 2 Find: A
Step 1: Find the equivalent amount of borrowing at the end of year 1:
Step 2: Use the capital recovery factor to find the size of annual installment:
Contemporary Engineering Economics, 5th edition, © 2010
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Example 3.20 Uniform Series: Find P, Given A, i, and N
Given: A = $10,576,923, N = 26 years, and i = 5% per year Find: P Formula to use:
Excel Solution:
Contemporary Engineering Economics, 5th edition, © 2010
Present Worth Factor