Scribd Logo
Upload

Welcome to Scribd!

  • 2K views

    Engineering Economics Cheat Sheet

    Uploaded by

    Nasser SA
    The document discusses equations for calculating present and future worth of cash flows using continuous compounding. It provides equations to calculate the present worth (P) given the future worth (F), interest rate (r) and time period (n), and vice versa. It also includes equations to calculate the effective interest rate (ieff) given the nominal interest rate (r) and number of compounding periods per year (M). Tables are presented with interest factors for continuous compounding of discrete and continuous cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Engineering Economics Cheat Sheet

    Uploaded by

    Nasser SA
    2K views4 pages
    The document discusses equations for calculating present and future worth of cash flows using continuous compounding. It provides equations to calculate the present worth (P) given the future worth (F), interest rate (r) and time period (n), and vice versa. It also includes equations to calculate the effective interest rate (ieff) given the nominal interest rate (r) and number of compounding periods per year (M). Tables are presented with interest factors for continuous compounding of discrete and continuous cash flows.

    Original Description:

    Engineering Economics cheat sheet

    Original Title

    Engineering Economics cheat sheet

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses equations for calculating present and future worth of cash flows using continuous compounding. It provides equations to calculate the present worth (P) given the future worth (F), interest rate (r) and time period (n), and vice versa. It also includes equations to calculate the effective interest rate (ieff) given the nominal interest rate (r) and number of compounding periods per year (M). Tables are presented with interest factors for continuous compounding of discrete and continuous cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    2K views4 pages

    Engineering Economics Cheat Sheet

    Uploaded by

    Nasser SA
    The document discusses equations for calculating present and future worth of cash flows using continuous compounding. It provides equations to calculate the present worth (P) given the future worth (F), interest rate (r) and time period (n), and vice versa. It also includes equations to calculate the effective interest rate (ieff) given the nominal interest rate (r) and number of compounding periods per year (M). Tables are presented with interest factors for continuous compounding of discrete and continuous cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Engineering Economics

    F  P(1  i)n (2.1)

    P  F (1  i)n (2.3)

    (1  i)n  1
    PA (2.9)
    i(1  i)n
    (1  i ) n  1
    FA (2.10)
    i
    F  A( F | A, i %, n) (2.11)

    ieff  (1  r / M )M / K  1 (2.31)
    Thus, the present and future worth equivalent of a gradient series can be obtained using the following
    equations

    1  (1  ni)(1  i)  n 
    P G  (2.19)
     i2 

    P = G(P|G, i%, n) (2.20)

    1 n 
    AG  G   ( A | F , i %, n) 
    i i 

    AG  G( AG | G, i%, n)

    A  A1  AG  A1  G( AG | G, i%, n)
     (1  i ) n  (1  ni ) 
    F G 
     i2 

    F  G ( F | G, i %, n)

    The present and future worth equivalent of the geometric series is obtained by multiplying equation
    2.27 by the future worth factor (1 + i)n, which results in the following equations

     (1  (1  j ) n (1  i)  n )
    A i j
    P 1 (i  j )
     nA / (1  i ) i j
     1
      (1  i )n  (1  j )n 
     A1   i j
    F    i j  (2.28)

    nA1 / (1  i) i j

    F = A1(F|A1, i%, j%, n) (2.29)

    Nominal interest rate r


    Period interest rate = 
    Number of interest period per year M
    Given P, r, and n, the future worth can be computed using continuous compounding as follows:
    F  Pern (2.33)
    F  ( P | F , r %, n) (2.34)
    Note that the subscript ∞ indicates that continuous compounding is being used.
    Similarly, we the present worth given F, r, and n using continuous compounding is given by,
    P  Fe rn (2.35)
    P  ( F | P, r %, n) (2.36)

    ieff  er  1 (2.37)

    ieff  ( F | P, r %,1) 1 (2.38)

    Table 2.1 Continuous Compounding Interest Factors for Discrete Flows

    Table 2.2 Continuous Compounding Interest Factors for Continuous Flows

    Find Given Factor Symbol

    P Ā (ern-1)/(rern) (P|Ā r%, n)

    Ā P rern/(ern-1) (Ā|P r%, n)


    1.1
    Interest and Principal Payments
    When we study the different methods to repay a loan, we learn that we make a payment, the lender
    apply the payment first to cover the interest of the unpaid principal balance, and then the remaining to
    reduce the principal balance. We can generalize the procedure as follows: if $P is borrowed (at t = 0)
    with a period interest rate i% /period for n periods and is to be repaid in n equal end-of-period
    payments (starting at t =1), then the amount of the payments, $A, can be determined by
    A  P( A | P, i %, n) .

    The amount of principal remaining Ut to be repaid immediately after making payment at time t is given
    by

    U t  A( P | A, i%, n  t ) = PV(i%, n-t, A) (3.1)

    where A, n and i are defined as above.

    A related quantity is the payoff quantity. Payofft is the total amount required to payoff the loan
    at time t, including both the current payment and the unpaid balance.

    Payoff t  A  U t  A  A( P | A, i%, n  t )  A1  ( P | A, i%, n  t ) (3.2)

    The interest accrued It during any payment period is given by

    I t  A1  ( P | F , i%, n  t  1) (3.3)

    The portion of payment Pt that does pay accrued interest goes to principal reduction, and is
    given by

    Pt  A  I t (3.4)
    ATCF  BT & LCF  LCF  T (6.1)

    TI  BT & LCF  IPMT  DWO (6.2)

    T  itr (TI ) (6.3)

    TI n  BT & LCF (including Fn )  IPMTn  DWOn  Bn (6.4)

    Section 179

    Amount expensed = max(0, (min(250, K )  max(0, ( K  800, 000)))) (6.5)

    EOY 3-year 5-year 7-year 10-year 15-year 20-year


    0 0
    1 0.3333 0.2 0.1429 0.1 0.05 0.0375
    2 0.4445 0.32 0.2449 0.18 0.095 0.07219
    3 0.1481 0.192 0.1749 0.144 0.0855 0.0677
    4 0.0741 0.1152 0.1249 0.1152 0.077 0.06177
    5 0.1152 0.0893 0.0922 0.0693 0.05713
    6 0.0576 0.0892 0.0737 0.0623 0.05285
    7 0.0893 0.0655 0.059 0.04888
    8 0.0446 0.0655 0.059 0.04522
    9 0.0656 0.0591 0.04462
    10 0.0328 0.059 0.04461
    11 0.0591 0.04462
    12 0.059 0.04461
    13 0.0591 0.04462
    14 0.059 0.04461
    15 0.0591 0.04462
    16 0.0295 0.04461
    17 0.04462
    18 0.04461
    19 0.04462
    20 0.04461
    21 0.02231

    You might also like