University:
Texas A&M University
Course:
ECON 202 | Principles of Economics
Academic year:

2021
Views:

370

Pages:

2
Author:

Alma Stephenson

Cost Indexes: General Annuity: Cost at time A Index valu e at time A  Cost at time B Index valu e at time B p (1  ieq )  (1  ic ) ieq  (1  i ) Power sizing: Cost of asset A  Size (capacity) of asset A    Cost of asset B  Size (capacity) of asset B  x c/ p c 1 ieq  interest rate for payment period p  number of payment periods per year x  power - sizing exponent ic  interest rate for compounding period Learning Curve: TN  Tinitial  N b c  number of compounding periods per year b log(learning curve rate) log 2 TN  time to make Nth unit Tinitial  time to make first unit N  number of finished units b  learning curve exponent Simple Interest: Interest earned on amount P : I  Pin Maturity value : F  P (1 in ) i  interest rate per time period Ordinary Simple Annuity (Uniform Series):  (1  i) n  1 Compound Amount F  A  i     i A  F n    ( 1 ) 1 i   Sinking Fund  i(1  i) n  A  P  n  (1  i )  1 Capital Recovery  (1  i ) n  1 1  (1  i ) n   A P  A n   i  i(1  i)    Present Worth A  periodic payment (end of period) n  number of time periods P, F, i, n as above for compound interest Compound Interest (Single Payment): Arithmetic Gradient Annuity: 1  n Aeq  G    n   ( 1 ) 1 i i   n F  P (1 i ) F  future value P  present value  (1 i)n  in  1 P G  2  n  i (1  i)  i  periodic interest rate n  number of periods Effective Interest Rates: i r m Aeq  equivalent periodic payment G  gradient amount (periodic increment) P ,i , n as above for compound interest (1  ieff )  1  mr  m i  periodic interest rate r  nominal interest rate per year m  number of compounding periods per year ieff  effective interest rate (compounded annually) Annuity Due: [Appropriate formula for question](1+ i) Perpetual Annuities: A P i Geometric Growth : P  Geometric Gradient Annuity: 1  (1  g) n (1  i) n  P  A1  ; i  g i g   P nA1 ;i g (1  i ) (1  i) n  (1  g ) n  F  A1  ; i  g i g   F  nA1 (1  i)n  1; i  g A1  payment in first period (end) g  periodic rate of growth A ;i  g ig P, F, i, n as above for compound interest Relationships: NPV/W  net present va lue/worth NPW  PWc  PW b A  Pi for n   Capitalized cost  P  A i EACF  equivalent annual cash flow EACF  EUAC  EUAB NPW  EACF(Capital recovery factor) EACF  NPW(Presen t worth factor) IRR  internal rate of return MARR  minimum acceptable rate of return To find rate of return : PW of benefits – PW of costs  0 PW of benefits/PW of costs  1 Present worth  Net present worth  0 EUCF  EUAB – EUAC  0 PW of costs  PW of benefits Salvage Value (using capital recovery formula): EUAC = P(A/P, i, n) – S(A/F, i, n) EUAC = (P – S)(A/F, i, n) + Pi EUAC = (P – S)(A/P, i, n) + Si S  Salvage value P, F, i, n as above for compound interest

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