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Equal Payment Series

- Uniform Series Compound Amount Factor allows you to calculate the future value of a series of equal periodic payments, given the payment amount, interest rate, and number of periods. - Sinking Fund Factor allows you to calculate the payment amount needed to accumulate a given future value over a number of periods at a given interest rate. - Uniform-Series Present Worth Factor allows you to calculate the present value of a series of equal future payments. - Capital Recovery Factor allows you to calculate an equivalent uniform annual payment amount given the present value of a stream of periodic cash flows over time at a given interest rate.

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Maya Olleik
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171 views5 pages

Equal Payment Series

- Uniform Series Compound Amount Factor allows you to calculate the future value of a series of equal periodic payments, given the payment amount, interest rate, and number of periods. - Sinking Fund Factor allows you to calculate the payment amount needed to accumulate a given future value over a number of periods at a given interest rate. - Uniform-Series Present Worth Factor allows you to calculate the present value of a series of equal future payments. - Capital Recovery Factor allows you to calculate an equivalent uniform annual payment amount given the present value of a stream of periodic cash flows over time at a given interest rate.

Uploaded by

Maya Olleik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Equal Payment Series

Uniform Series Compound Amount Factor


 (1  i ) N  1  F is the future value of N equal
F  A 
 i 
payments the size of each is A. F is
confounded in time with the last
𝐹= 𝐴(𝐹 / 𝐴 , 𝑖, 𝑁) payment.
Example: The future value of 4 equal
F=450.61 annual payments of size 100 each
occurring at 6, 7, 8, and 9 with i=8%
per year is
100 100
F=100(F/A,8%,4)=100*4.5061=450.61
100 100
at time 9 (confounded with the last
payment)
6 7 8 9
Sinking Fund Factor
 i 
A F N  How much money must carol deposit every year starting 1 year from now
 (1  i )  1  at 8% per year in order to accumulate $6000 four years from now?

F=6000, i=8%, N=4, A=?


𝐴=𝐹 ( 𝐴/ 𝐹 , 𝑖 , 𝑁 )

F=6000
Solution:
A=6000(A/F,8%,4)
A
=6000*0.22192=1331.52
A A A

0 1 2 3 4
Uniform-Series Present Worth Factor
 (1  i ) N  1 
P  A P is the present worth (equivalent value) of N equal
N 
 i (1  i )  periodic payments, the size of each payment is A. i is
the interest rate per period.
P occurs in time one period before the first payment

P
A A A A

2 3 4 5 6
Capital Recovery Factor
 i (1  i ) N 
A P
(1  i ) N
 1  𝐴=𝑃 ( 𝐴/ 𝑃 ,𝑖, 𝑁 )
 

Example: Revenue from the sale of ergonomic hand tools was $300,000 in year1 through 4 and $465,000
in years 5 through 9. Determine the equivalent annual revenue in years 1 through 9 at an interest rate of
10% per year.

PV of the revenues in years 1 through 4= 300,000(P/A,10%,4)=300,000(3.1699)=950,959.63


PV of the revenues in years 5 through 9= 465,000(P/A,10%,5)(P/F,10%,4)=465,000(3.7908)
(0.6830)=1,203,939.13
Total PV=2,154,898.76

A=P(A/P,10%,9)=2,154,898.76(.17364)=374,176 per year

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