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Claude Thoret
December 2015
Legend
December 2015
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A. Single-Payment Formulas
1.
F = P(F/P,i%,n) = P(1+i)n
2. P = F(P/F,i%,n) = F(1+i)-n
EOY
Investment
0
1
2
3
$P
0
0
0
0
0
Annual Interest
Income
iP
iP(1+i)
iP(1+i)2
iP(1+i)N-1
EOY = End-of-year
P+iP = P(1+i)
P(1+i)+iP(1+i) = P(1+i)2
P(1+i)2+iP(1+i)2 = P(1+i)3
P(1+i)N
_____ Equation
1
Multiply Equation 1 by (1+i)
(1+i)P = A(1+i)-1+1 + A(1+i)-1 + A(1+i)-2 + + A(1+i)-n + A(1+i)-n+1 Equation 2
Factor out A and subtract Equation 1 from Equation 2
(1+i)P - P = iP = A-A/(1+i)n-1 = A{1-1/(1+i)n};
F = A{[(1+i)n-1] / i} _____________________________Equation 4
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OR
(P/G,i,n) = (1/i)[P/A,i,n) - n/(1+i)n]
OR
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3.
Equivalent uniform series of an arithmetic gradient series
(A/G,i,n)
If the Present Worth or Value of an arithmetic series is (P/G,i,N), its
equivalent uniform series (A) is given by the product
Case 1: g i
The present worth or value of a geometric series where g i
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Case 2: g = i
The present worth or value of a geometric series where g = i
P = C/(1+i) + C(1+g)/(1+i)2 + C(1+g)2/(1+i)3 + + C(1+g)n-1/(1+i)n
P = C/(1+i) + C(1+i)/(1+i)2 + C(1+i)2/(1+i)3 + + C(1+i)n-1/(1+i)n
P = C/(1+i) + C/(1+i) + C/(1+i) + + C/(1+i)
Therefore P = nC\(1+i) = nC/(1+g)
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Summary of Formulas
A. Single-Sum Factors
= (/, , ) = ( + ) = (%, , , )
= (/, , ) = ( + ) = (%, , , )
( + )
=
( + )
( + )
=
( + )
( + )
=
( + )
( + )
(/, , ) =
( + )
( + )
OR
( + )
(/, , ) =
( + )
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( + )
(/, , ) =
(/, , ) =
( + )
If i g
If i = g
(/, , , ) =
=
+
+
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References
Blank, Tarquin and Iverson, Engineering Economics, Canadian Edition, McGraw-Hill
Ryerson, 2008
Fraser and Jewkes, Engineering Economics - Financial Decision Making for Engineers,
5th Canadian Edition, Pearson Publishing, 2013.
Larsen, R.W., Engineering With Excel, 4th Edition, Pearson, 2013.
Newnan, Whittaker, Eschenbach and Lavelle, Engineering Economic Analysis, 3rd
Canadian Edition, 2012.
White, Case and Pratt, Principles of Engineering Economic Analysis, 5th Edition, John
Wiley & Sons, 2010.
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