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Interest Formulasfor Single Cash
FlowsModule 6Chapter 3Contemporary Engineering EconomicsCopyright 2010
Contemporary Engineering Economics, 5th edition, 2010
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Types of CommonCash Flows inEngineering
Economics
Single cash ow
Equal (uniform)payment series atregular intervals
Linear gra ientseries
!eometricgra ient series
Irregular(ran om) paymentseries
Contemporary Engineering Economics, 5th edition, 2010
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Equivalence"elationship#etween P an
FCompoun ing
$rocess % Fin ing anequivalent futurevalue of current
cash payment
&iscounting$rocess % Fin ing anequivalent presentvalue of a futurecash payment
Contemporary Engineering Economics, 5th edition, 2010
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Single+mounts, FinF - !iven i - N -
an P!iven , P .
/0-111- i . 213- N . 4 years
Fin , F
E'cel Solution,
Single Cash Flow Formula% Compoun +mountFactor
Contemporary Engineering Economics, 5th edition, 2010
P
F
N
0
(1 )( / , , )
N
F P iF P F P i N
= +
=
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+ TypicalCompounInterest Ta5le% say 203To 6n the compoun
interest factor whenthe interest rate is203 an the num5erinterest perio s is 21-we coul evaluate thefollowing equationusing the interestta5le
Contemporary Engineering Economics, 5th edition, 2010
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Single+mounts, FinP - !iven i - N -
an F!iven , F .
/2-111- i . 203- N . 7 years
Fin , P
Excel Solution:
Single Cash Flow Formula% $resent 8orth +mountFactor
Contemporary Engineering Economics, 5th edition, 2010
P
F
N
0
(1 )( / , , )
N
P F iP F P F i N
= +
=
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Single+mounts, Fini - !iven P - F -
an N
!iven , F . /01- P ./21- N . 7 years
Fin , i
E'cel Solution,
Solving for i
Contemporary Engineering Economics, 5th edition, 2010
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Single+mounts, FinN - !iven P - F -
ani
!iven , P . /:-111-F . /20-111- an i .013
Fin , N
E'cel Solution,
Solving for N
Contemporary Engineering Economics, 5th edition, 2010
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"ule of
*0
+ppro'imating how long itwill ta;e for asum of moneyto ou5le
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E'ample 22?neven$ayment
Series
@ow much oyou nee to
eposit to ay ( P )to with raw/07-111 at n .2-/ -111 at n . 0-an /7-111 at n .A- if youraccount earns213 annualinterestB
Contemporary Engineering Economics, 5th edition, 2010
01 2 3 4
$25,000
$3,000 $5,000
P
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Chec; to see if /04-:00 isin ee su cient
1 2 0 A#eginning#alance
1 04-:00 :-A4A 01
A-2 0 :0
A-7A7 44
InterestEarne(213)
1 0-4:0 :A4 A0 A2 0: A7A 79
$ayment
D04-:00
07-111 -111 1 7-111
En ing#alance
/04-:00 :-A4A 01
A-2 0 :0
A-7A7 44
1 A*
Contemporary Engineering Economics, 5th edition, 2010
"oun ing errorIt shoul 5e 1 G
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E'ample 20Future >alue of an?neven Serieswith >arying
Interest "ates
!iven , &eposit seriesas given over 7 years
Fin , #alance at theen of year 7
Contemporary Engineering Economics, 5th edition, 2010
