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.................................................................................................

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.................................................................................................. ! "
( .............................................................................' & %$ #
2 ................................................................................. 0 1 ./ - *, ) * +"
2 .................................................................................................. * +" ! 3
4 ......................................................................................................... *,
4 ............................................................................................ *, 5
67 .................................................................................................. 0 1 ./
66 ............................................................................................ PE # 3" ./
66 .......................................................................................................89
6; .................................................................... * +" 89 $ : 3"
6 ................................................................ < )= < ) <
6( .................................................................. > -= > ) >
6@ ................................................................................... ' ' 0 1?
6@ ............................................................................................ 0 1 ' 1 + A
;; ................................................................................................. ! " # B
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;; ..................................................................................... !-> $ 0 1 C
; ............................................................................................. ! " >
; ................................................................ DE F ' G 0 >
; ..................................................................................... C 0 ,H 0 >
;( .............................................................................................. >
;( .......................................................................................... = >

I6 .................................................................................................
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I; .................................................................................... ', G / " - / "
I; ......................................................................................... / " .
I; .......................................................................................... / " ! 3
I; ................................................................................... ', G / " ?
I; ................................................................C /A = ,J ', G / "
II .......................................................... C /A K = ,J ', G / "
I .................................................................. # B-
I ...................................................................................... # 0 L0
I .............................................................................. # &M $, 1 N,
I( ...................................................................................... # 0 L0
I( .............................................................................................. # 3"
I( ............................................................................. , .9G0 1 N,
I4 ...................................................................................... F - P O1
; ........................................................................ P # ,P - #- Q
( ..................................................................................... R S ' .! T
( ................................................................................... .S M U J
@ ...................................................................................... ',
7 ...................................................................................... ,VW N, ) / N,
; ............................................................................... ,V N, X / N,
; ................................................................................... C JU ,
............................................................. < ,1 - ' % M"
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................................................................................ E3P L0 L-
(7 ...................................... EUAC , EUAB [ Z.S M Y # 3 L-
(( ......................................................... P * ' \G , E5" - >]"
(( ............................................................................ / ," L- ,1
2; .................................................................................. " 5 L-
2 ............................................................................ ^ F 1 _P L-
22 ................................................................................................... `a
22 ............................................................................... `a Q- [
22 .......................................................................................... ', P L0
22 .......................................................................... `a 5 ' J-
@; .............................................................................. `a L- F

@I .............................................. b ! - `a C / c 5! 1 ' E5" - >]"

@I .............................................................................................. (TX)b !
@I .................................. b ! ,& 0 31 ! <,P d! S < 5 L-
@@ ................................................ ' ' ,1 b ! - `a 8+
@4 .......................................................................' ' ,1 K - b ,V
46 ............................................................................................ >e Q > ! <
46 ........................................................ > T 1 Q "1' ,/ : 3"
4 .............................................................................................. &T > ! <
4 ..................................................................................... "- " 1 5
67 ........................................................................................................ K "
67 .............................................................................. K " C < Q 1 E
67 .................................................................................... K " N, 5
66 ........................................................................................ (f) K " N,
66(........................................... Z' ' $f-, K " ,V ,1Y K " > ! <
66(............................................................................... if ', g N, 5
66(.................................................................................. " .1 V U ,*
6;7............................................................................................ & Ee _Q ,
 ',H Ih

j,A & + ' ,1 K0[ - % M" i - - # B 1 C ]9 C J J<

kkk b ! )K " )$, 1 # 0 L0 : P,G ,H 1 ' \G , DE F ' $f-, -

!
' /5 , )' ' j,A 1 0 l6
k nm M
 "# $ %& '
&( ) *
+
"# ,+
[ A ,/ [
o /3 - ,G ! "p 1-$ Jq / ! " 1 E E 1
k ,
b[< >1 , - b > ]" ): J )# h- .

1
!, / 0 & ,;
'-, ,G , $ b S # 5 % ! " ' ,1 & E
k J $ '-, &

4
2& 3 ,I
k J J J1 0 ! " ' ,1 M>P E
' rP ) < ) !- -.

:- 1 ,e - : !- k J 1 s P ! " EB
k $ / P * C< 1 ' - P - . ,

5
# # ,5
k J1 ' ! "$e1$ 'f !- L- 0 b .,
6
0 ,
! " ,P ' - P tO b S-[ ! " ' ,1 $ b > ]" - P8 ?
k C9

2
k. b S-( [ J ! " u< •

Capital
Labor
Land
Management
Technology
Goods
Services
 k ? "b S- [ •
k . - 5 ./ -? " Q0 b S- [ •
1 ] . - 5 .E31 S0 b S- [ " ' ,1 $ , %
k J1 F
v ,G b B ew F •
@
k J K] 7& 0 8 ,1 1 9 ' [ C 0 [ % F
0 % /& 9# : -
k ,G % M " , 0 MJ w 1 < - > ' & % $ #
CG , < l6
G 0 > l;
' ! "b& W P lI
! " > l

" !
&# $%

k $ J &+" $ / $-,G - 1 ' ' T-# :

CG , l6
' ! " b & W l;
k -, ,e M 1 DE F 01- $-,G - :
b S - P, ' [ 0 1 l6

Price Theory
 ' ! " _1 0 1 l;
./ ' x" - $ 1 ' , - 0< & % EM9 ' ./& s P G w
k. $ J 1 w: ,1 >
k J , gs P ,G $ J dF9 MJ ; 1 S - C ,Q # •
++ +?
3@ 7& "; * >= ; <
;< •
CG , [ C< 0 E F , + 0 .&" [ % ' ,1 * +" ; < A#
k J 1 .1 V , M < ,1 y-,9 J1 C< ,S 1 ,* T DE F ' ./

; < B C& DE ) * •
Px [ ./ l6
T CG , + E l;
C CG , 3" lI
I CG , < l
Pn &1 - ' [ ./ l
R CG , , b S- [ - T l(

+1
; < "(
h J1CG , ' * +" ' [ 3" X ,G
X= f (Px, T, C, I, Pn, R)
Px ./ , Vz" "
T + E , Vz" "
CCG , 3" , Vz" "
ICG , < , Vz" "
Pn &1 - ' [ , Vz" "
R , b S - [ , Vz" "

Demand
Supply
Market Price
Demand Curve
[ % ' ,1 * +" C > ,VW , ./ 0 , { M " B ) * +" D ,3" 1 |1 O
h0 .&" X [ ' ,1 * +" ! 3 J },P .1 V

X= f(px) ,
Px= g(x) h -

k. $ J $ -< , 0 #- Q DE F ' ./ 1 X '[ ' ,1 * +" C > - .

7& ;< <

6777 7
;777 7
I777 I7
777 ;7
777 67

px
F -. 0 @ ;< G

D
,(((

+(((

*(((

)(((

'(((

'( )( *( +( ,( x
 "; *
,* T C G J-,P [ C< 0 E F , + 0 .&" [ % *, "; * A#
, ~" - $ .1 V , y,91 ) \e1 L-,P },3 1 0 1 DE F ' ./ ' 0
k M

k. $ J $ -< , 0 #- Q DE F ' ./ 1 x '[ ' ,1 *, C > - .

7& "; * B C&

6777 67
;777 ;7
I777 I7
777 7
777 7

"; * G

px

,(((
S
+(((

*(((

)(((

'(((

'( )( *( +( ,( x
 "; * "( •

X= h(px)
Px= k(x) h

3@ 7&

S / MJ % : 3 '[ % ' ,1 * +" - *, ' 5 $ G,

h.J

Px
D -./ S
(Excess)
P' N
M

Pe

P) K L

(Shortage) - 01

O X' Xe X’) X’'

X)
x
 0 Ox’6 – Ox6 = x6x; = MN Pe
/ Ox; – Ox’; = x’;x; = KL Pe

+4
Pe - 7&
k / _O ,e M * +" - *, ' 5 C< . / )# 3" ./

: / ' ,1 * +" _1 " - Px= g(x)= - x + 0 b x '[ ' ,1 *, _1 " ,G h"H8/

k / 5 \ '[ ' ,1 # 3" ./ k J 1 px = k(x)= ;x + 6 h 0 b [
k , L-, 1 ,H '[ 0 T - w ./ :

+5
IJ!

k / ', G $0 ./ b , ~" 1 + $ , P b , ~" 89 hA#

6
1- J1 ./ b , ~" 1 + * +" 89 ', G $0 0 b ;< 7& IJ!
k J $ C 9 €ep•
0 % .$ 2
ep= 3
0 4
% #.
.$ 4
2
51 6
∆χ / χ ∆χ p x
e = = .
p ∆p / p χ ∆p χ χ
k J D ,3" , 0 b B 1 y 1 + x 89 E O1

∆x
∆x y
Ε xy = x = ⋅
∆y ∆y x
y

[ : ' ,1 * +" / 89 k J 1 , 0 MJ 1 x '[ ' ,1 * +" 5 h- .

k / 5 ΡΧ = 7 O+

Equilibrium Price
Elasticity
Price Elasticity of Demand
 px
D

x
'(( )(( *(( +(( ,((
7(( 8((

∆x P 100 − 400 7 2100

E ΧΡΧ = ( ).( ) = ( ).( )=− = −10.5
∆Px X 7−5 100 200

S C 9 /3! ‚M •6; $ , / , ~" •6 ./ ,G . 3 C 1:

k

,1 / 1 ,H O+ 89 5 ' ,1 J OS b 1 * +" 5 ,G
k ,G 5 89 L- : / 1 ‚ƒ - / 5

dx p
Ex px = ( ).( x ) h * O1
dp x x

89 px=( O+ ) J 1 x= @77l677p b 1 x '[ ' * +" _1 " ,G - .

k / 5

p = 6 → x = 200

dx p 6
E=( ).( x ) = −100 × = −3
dp x x 200

; < IJ! : ! 2&& ) *

2&J 0K ! ,+
 L ! C X C P " C )' \{ X C / S J + )-, X 1 " -.

k. , 9 1 * +" 89 J 1 , 9 1 : 9 Q '[ ,

K!3 : ' ,1

s,1 ) < - .

k. , 9 1 * +" 89 J1,91[ 0 $ ,

" @ K ! " #C M% L B C& ,4

.J G )` J -.

k. ," J * +" 89 J1,91 Q 1 [ > ,

N ,5

k. , / * +" 89 J 1 ,"[ 1 $ , < + ,

-.

px=; O+ * +" 89 x=;px ; - px + I 0 .&" x '[ ' ,1 * +" 5

k / 5

px = 2

X = 2 × 22 − 2 + 3 = 9

dx
= 4 px −1
dp x

dx p x p
Ex px = × = (4 p x − 1) × x
dp x x x

2 14
E x p x = ( 4 × 2 − 1) × = = 1.56
9 9

( px = 2 x = 9)
 −x
[ ./ $ G, * +" 89 k J 1 px = +5b 1 x '[ ' ,1 * +" 5 h- .
2
v. +w J 1 ! T-I
− x + 10
px = → 2 p x = − x + 10 → x = −2 p x + 10 → p x = 3 → x = 4
2
dx p x 3
Ex px = × = − 2 × = − 1 .5
dp x x 4

k J1 , 0 MJ 1 n '[ ' ,1 S % ' * +" _1 " h- .

Xn= apn+bpi+cy

h C<

Y= S <

Pn = n '[ ./

Pi = i '[ ./

C= , 1

k J 1 y =677 - pi = - c=7k6 - b=7k - a= l; ,G

k -< . 1 $ S ' * +" _1 " MA(

k / \ _1 " M

X n = −2 p n + (0.5 × 4) + (0.1 × 100) = −2 p n + 12

X n = −2 p n + 12

pn

o
7 9 ') xn
*
 # N >O N >)! N

0 $ J ! "' T - E L-,P ' ,1 $ J .P $ Q- E 0 .&" h (TR)6()! N

! "$ - % R S '[ %
TR=Px.X

[ T - % L-,P 0 B T < = 0 .&" h(AR)62O N

TR Px X
AR = = = Px
X X

Total Revenue
Average Revenue
 [ 1 < 5 |9 " 1 TR 5 U J 0 .&" h(MR)6@ # N
dTR
MR =
dX

Z6 k J ! " [ : 0 T - 67 ,G k J 1 Px=677l x…;x; [ % ' ,1 * +" _1 " h# „

k -< . 1 < _1 " ZI < Z; [ ./
Px x =10 = 100 − 50 + 200 = 250
TR = Px . X = 100 Χ − 5Χ 2 + 2 Χ 3
TR x =10 = 250 × 10 = 2500
dTR d
MR = = × (100 x − 5 x 2 + 2 x 3 ) = 100 − 10 x = 6 x 2
dx dx

k J ,91 < ! " 8 >P 1 MR>7

k J ,/ < ! " 8 >P 1 MR<7
k / ', ~" < ! " 8 >P 1 MR=7

1+ 1?
# " #C O " #C >+=)! " #C
% R S '[ % ! " ' ,1 ' ! " T - ' > E 0 .&" h(TC) )! " #C
k' ! " $ -
TC = Cx .x
'[ % 0 T - % ! " ' ,1 $ J K ] > = 0 .&" (AC) O " #C
kR S
AC = TC†x
. > |9 " 1 TC > 5 U J 0 .&" (MC) # " #C
k[ 1.&
MC = dTC/dx

> - < * " 0 .&" ( ) )!

= TR- TC Z _1 "Y

Marginal Revenue
Total Cost
Average Cost
Marginal Cost
 : ! &( 9# 0 @ .! P Q
MC = MR

C< > _1 " - Px =677l x ' ! " '[ % ' ,1 * +" 5 h- .

,„ T 1 $ ! " : ! " 0 ' + - ./ k J 1 TC = 7…;7x
k / 5
MC = MR
MC =dTC/dx= ;7
TR = Px.x = 677xl x;
MR = dTR/dx= 677l@x
677l@x=;7 x=67 px=(7

> _1 " k J 1 Px=;7-x d! S 5 01 ' ! " $ e 1 % ' ,1 * +" _1 " h- .

k. TC = x; + @x + ; 1 ,1 ,1 ' ! " $ e 1 :
v ,„ T $e1: ! " + w ka
k. +w .! T : [ ./ kb
k / $e1 < - ‡E kc

= = TR – TC = Px.X- TC= (;7-X)X- (X;…@X…;) = l;X; + 6;X- ;

h ,„ T ' ,1
d /dX= l X…6;=7 X=I ,„ T ' ,1 ! " 3"
Px=;7-X=;7lI=62 [ ./
ˆl;x;…6;xl;=6@…I(l;=6(
TR=P.X=I(62)= 6 <
TC= I; + @*I…;=I >
 0 0 3@
. :M/ ' ! " & W k , G , ,1 ' ! " & W $G 0 * +" 8F1 :
k J1 . ,J - 9 )' , b 1

k J i ' ! " & W = " [ ? % l6 },P

& 19 a
o 01 $ J i ' [ l; },P

C< 0 E F , + ' ! " & W % '[ ' ,1 $ J-,P 0 * +" 5 R G

$ SR G S 5 : k C9 L-, 1 DE F ' / [
k J

3 @ 0 @ "< T
11
U( V @ 3 @ ,+
k J 1 , ,1 , 0 y,J Q- d! S .1 0' 01%
[ C 1 C &M k6
0 1 ]T 1 . & $ J-,P - ,S , C 1 %w k;
,S 3" . - 5 l L-,P C 0 . - 5 Y ' . - 5 Q- K kI
Zkkkkkkk L-,P
' ! " _1 - [ # + . E1 k
0U -.

Pure Competition
 R G
MJ 1 # 3" O+ J Q C< 1 ' ! " & * +" 5 d! S .1 01
k J1 +P
51 6
#./ PX

Pl

x
. -. :
&;<

U( V @ 3@ ; < IJ! " G

∆x P
E x Px = × =∞
∆Px x
∆Px → 0

k / L-, 1 - '[ , 1 [ 1 ./ $ J-,P % ,G

14
) ! @ 3 @ ,1
> /] y,J s P y,J ,1 $-a Q- .1 0' 01%
h0 .&" C< - J 1 , ,1
' ! "' T - E ' ,1 3 Q ' b ,Q 0 - P ?aA l;
U( V G 3 @ ,4
:9 Q- . ! 3P ' ! " & W % =+P 0 1 . ! T d! S 5
k Q- L-, 1 [ ' ,1
$ ,/ : E" =S ‰ .1 V : E" =S ‰ C , b ,1 F . ,J h- .

Perfect Competitio
 MR L G

px
D

" W G 3 @ ,5
, #/ . + < C G J-,P 3" C< . ' 01 Q w 5 01
k J _ - ,VW C G J-,P , ' . ! 3P <0 %
C, - S 0 1 h- .
C G J-,P d! S 5 - d! S .1 01 aS,1 Q w 5 01 •
k J1 &1 - ,e M 1 - J S 0 !a+

;< G
$ J-,P % #, ZC G J-,P 3"Y /3! ‚M C w Q w 5 01
' ,1 dF9 ' * +" 5 \! k / 18 0 1 ' * +" 5 " / - J1 /
k / ," C " / 0 1 :
k JK] " ,0 O1 $ J-,P % ./ , ~" 1 + C G J-,P , /3! ‚M
SU ./ , ~" 0 '-, Z6
- 0 ,/ C> 1 ! )U ./ , ~" . Q ./ , ~" Z;
U ./ 8 0 81 + 1 ./ 8 ZI
S '[ . Š +" Z
_ -b~E"K] 1K Z

0 G @ 3 @ ,6
 Q- R F1 '[ % 0 ' 0 C G J-,P C< . ' 01' 5 .1 01
1 ' 5 1 C G J-,P , '[ 0 $ J-,P , '[ C G , ,H 0 )
k J1 d F9"
" 1 < 0 %, #/ . 0 +< 0 1 : C G J-,P 3" •
k C G J-,P , b E/ ,1 ', Vz"
' ,1 1 S : 9 Q J i DE F C G J-,P = " 01: ' [ •
k J1
‚ )Zb SY‚ -, & " ) Q ), ,5 ! K0 ! ) 9S h# „ •
S :{- )>

R G •
: ,G k ,G J ,e M 0 [ d F9" . E1 0 0 1 : * +" 5 MJ
d! S .1 0 1 ' * +" 5 J * +" 5 J1 J Q- d F9" . E1
C> 8 8 >P S '[ ./ )C G J-,P 0 M ,G 0 1 : k J1
, 3" C w !- k 1 S Q " 1 $ J-,P : ' ,1 C , 9 C . 0 \Q
8 8 >P \G <C ,9 3" ,1 / &1 , Vz" . 0 &1 C G J-,P
k , ~" # 3" ./ .& ' +1 C G J-,P , C ,9

Px)

Px' D' 3 4 =
> #./
D?
) @ . 3 4 =
A B$C

x
 &( - X
- M9" [ *, - ! " > E5" - >]" - ! "# B •
) < # ~ J tO - ' ! " _1 ./ : 3" e ew E5" - >]" ' ,1 / -
k. ' b ! " - ' ! " _1 _ 0 "
' ! " _1 U ," - " J- | ,A 0 3 ' ! " & W ! " ' x" •
k / ! ":3 > 1 M/ # 5 ,„ T ,e M 1
;
&( "(
' ! " & W % $ ' ! " _1 :1 Q O1 ! " ! 3 0 H
k J1 ./ : P,G ,H C- 1 C 0 T - % $ J ! "b S [ -
X= f(a,b,c)
$ <. 1# 5 ˆX
P M1 ' ! " _1 ˆ a,b,c
k J1 L- : ,",VW $ J P M1 ' ! " L- h },P •

16
( C : 3@B
- 8 >P '- & , + 1 $ ' ! " _1 0 M + C 0 T- , ,G
1 ET, 1 ET, $ < . 1 # 5 C> ) e .1 V P M1 ' ! " _1 , , +
P # 5 8 >P + : 3 ET, % 0 : J\G 0 ‚ !- ) 1 8 >P ' $ >P N,
k J ,/ P

# 5 8 >P ' ,1 8 >P +- .

k J1 / P T 1 C< C ,G ' S C ,G 3" 8 >P 1- .

S k J ! " A# 5 - 5 b > ]" - rP 1 ' ! " S % 4- .

, ‹ 3" 1 A # 5 - P 8 >P 0- C ,G 3" ! K - $ 1 '0 $ ,J
k ,G ! " , 0 #- Q $ J
C9 !-> $ 0 1 A 1, 5 1

Production Function
The Law of Diminishing Marginal Physical Product
 - G Y !
67 ;
;7 I
I
7
I (
2
@
7 4
I 67

,(

+(
? @ >
D #. 4

*(

)(
'(

l
8 E 9 '(
) ?- *FG . -# + # ,%
$ 7

8 >P ] 9 >P + 0 .&" ' ! "_ % # 5 h;( # - G

! "|9 " 1 - ,G BT# 5 C> Z,G Y' ! "_ T- %
k J1 C ,G 1.&
MP = MPP = dx/d = f ( )

Marginal physical product

& ' ! "$- % C ,G = "$ J ! "# 5 0 b h)! - G
k J1 ' ! "

TP = x = f( )
' ! "$ - % ,G % = "$ J ! "# 5 = 0 b hO - G
k J1
AP = x/ = f( )/
 &( " #C
E J J ,B # 5 ! " ' ,1 ' ! " & W , = " > hD ,3"
> 1 > : ! k0 , P M1 ' ! " _1 .1 1 ' ! " & W . Q-
k b- " 3 -

&( " #C D HX ) *
k ,0 1 e &1 5O , ! " >
' ! " _1 ./ Z6
' ! " _1 0 $ - ', G M1 & W < Z;

AH Z 0 Y # 3 " #C %& '

[# \ " #C "# ] M+
' [ , L0 0 .&" ) A B F1 # 5 ! " > A#
P M1 A ! " ' ,1 31 C/ 0 $ 1 .& " 3 Q ' $ J J 9w
k / ! "
: O ,J 1> _1 L0 0 .&" ' ! " & W ' ,1 P M1 _1 >
k < # ~ J .5" M/ . 3 :, 1 _1

\QN &^ \QN 0 " #C M1

^ F ->Q [
o /3 . > J MJ< ' ! " ' > h \QN 0 " #C
kkk )`a ) ) >/ „ k -< /91 ' ! " & W % ' Q
B FJ s +T - >/ > 0 " MJ<, { ' ! " ' > h \QN &^ 0 " #C
k J1 ' ! " & W %! S - 0< ~J

B 3 ] 3 " #C
h0 " - C 0 Q0 > 0 ',e ' 1 &+"
C< # A ' ! " & W $" ' +1 . 0b $" 0 H : ! Z6
)C / S ): 0 h k , ~" S$ ' ! " _1 0 S,1 .&
),G 31 , ~" C M b $ " !k J $ Œ.1 V _1 Œ C,
k Q- J $ Œ, ~ _1 Œ 1 9 _1 , - ) !-
 " ' ! " & W C< # A . 0 $ - )b E1 0 H H@ Z;
k , ~" Z, ~ w ).1 V wY S$ ' ! " _1 E , +
1_
)! " #C
;4
k J1 ,~ ' > - ;@ .1 V ' > _/Q B T 0 b >

)! @ D 0 " #C
C> 0 + & )C 0 0 T- , ' ! " & Q F E 0 . b
> : ! " + 1 Q " C- 1 k ' ! " _1 , 1 )$ J ! " # 5
k ! " EB b[< : J - : 0 ,S $ Q k 1 1 V tO

)! &` 0 " #C
C> 1U )C 0 0 T- , ' ! " & Q F E 0 . b
k ! " !- - K S k ' ! " _1 , 1 )$ J ! " # 5

C = K + f(x)
TC TFX TVC
4?
O " #C
I;
,~ ' > = - I6 .1 V ' > = B T 0 .&" = >

C/X = K/X + f(x)/X

AC AFX AVC

B & .! "@ P Q
= TR – TC = f(x) – g(x)

k , , B ,1 ,1 - , G | 9 s P O1 0 C ,„ T 1 ' ,1

TC = Total Cost
TFX = Total Fixed Cost
TVX = Total Variable Cost
AC = Average Cost
AFX = Average Fixed Cost
AVX = Average Variable Cost
D / dx= f (x) –g (x) = 7
f (x) = g (x)
h0 .&" C ,„ T 1 ' ,1 K0[ y,J
MR=MC
h0 .&" C ,„ T 1 ' ,1 P y,J
D; / dx; <7
 Ba!
k J $ Ca )3 Q 3 )_ - tO 3! O
K] ' ! " $e1 . ,J % '0 1 1 y " 3! O - ,1 h ,S
k
kkk - b V' & Š +1 ) 3 Q • T ' ,1 3! O - ,1 hCa
k. .!- [
o /3 & : ! k J1 3 Q E t! # 1- K]

3 Q ,1 E k ,1 K C< J . Q - - ]& & -KH 1 .!-

k #, -b H [10 -
,„ T T- , M A ) , e1 b B T - %" %" tO '0 1 ,G h# x
v, S . 3 Q _ 1 < ,1
,1 ,1 : w /5" 3 Q - ,e ' . ,J 1 ' ,* . ,J % . :M/
k. $ -< . 1 J1'
ES - J l v.!- g- h#
ES J 1 K0[ iQ, - ,G ,H 3 Q E _ - . - J .!-
k /
0 \&@
k J1 J , 0 Gn - I J G FJ 1 M 1
k J1$ K ] , e1 >/ C< ' 0 ' ,S % # A k6
k J1$ 1 ' ] &Q J\G w# A # 3P O1 k;
k J1 J " ,* T # T kI
 h J &+" $-,G I 1 3 Q ,P
: E{ J k6
C M 1 k;
k J1 / ' '-, Š>Q ' ,P kI
) S C0 „ ,e $-,G - / CJ S $ - 1 ' ,P „
kkkk - b 0 ' / 1 M & )$ P 0 ,P )C 0 < 8

0 \&@
Zm MOB Y Ž S,1 Ž M 1 l6
C 0 EB P ' M1? : k < Q- 1 ~J , ~" ] . ' M1 l;
Z' Y. Q ~J C , " E C . 0
Z EM Y ' - ' M 1 lI
T-D K F 3 : w k 0-,1 ' = ,J ' M1 :
Z' , {Y / ^ ,S C ,G 0'$ or31
' S ' M 1 lI
C ,G ] k J1 .3 B % ] " :P C 0 )' M 1 ? : EB
k J ' M1L F _ B? : 1 # ~9

0 \&@ &Tb
. 0 ' M 1 N, k J $ Œ' M 1 3 A N, Œ # 3" = ,J ' M 1 N,
k J 1 , ,1 ' ] &Q ' ,P 3" - ! S { 9 : 1 ,+" # 3"

) !-`Q
#~J #T ) J1 ' M1 3 A N, ' ' 3 Q ) Q C
k
A ). # ~ J )' M 1 0 B w " # ~ J •677 0 M C ,H
k. $ , , ~" J\G ' !
' M 1 Z• " • 0 Y (7 0 ' ! "
' M 1 Z • † " •7Y "
k. $ J i DE F ' ,H 31 1 9
 3 B ' $f-, ' 1 0

" <
C 0 T$ :, 1 F - ', G / " - & + ' % M" )$f-, ' E5"
k J J ' ! EO = ,J ,1 Q ' T$
., - j,A EB • J1 1 y 1, T, 0 ' ) E5" ' & •
, G >1 1C ' ,1 - # ) ,P ' M/ e ew - $ , ,1
k / dF9
k Q- , 0 j,91 E5" & % EB 5 • •
j,J l6
, \ , Vz" ' 3 ' 1 # ,P l;
T$ i lI
T$ 1 0 l
Q ' T$ 0 Z :, 1 Y:, 1 F l
% ' ,1 ' &1 _P " baM9 - t * " - j,J ) J 1 ,G E5" •
k -< C ~ 1C 0
k J1 $ < 1 = ", ' . / 1 0 )' E5" % 0 8F1 : ," M9 •

A#
' & + C, $ ' ,1 ) * ' % M" 0 ' /] 0 b
: 3" ' ,1 ', G / " >1 )," $ b 1 - J1 3 B ' $f-,
k. $f-, : ," '
: ,",1 1 - K E 0 ', G $, 1 1 d F %
k J _1 . - 5 1 Q " 1 $f-,

k J 1 ,H 1 - A 1, E •
b aA - J dF9 , . - 5 1 Q " 1 $f-, E l6
k ,G ' -< _/Q 0
 J $f-, : ," ' - ,G , E5" - >]" )b aA l;
k J
0 &Y %&7 %&7
' % M" k. , % EB . ! x& - g- : , / C 31 ', G / "
k J1 t 5B / " ‹ F" . Q , S ' >1 )

%&7 &
Q b aA - $ ' <,P k <,P % C - ] 0 .&" / "
: , 1 - ,H ' 'n" , 1 <U U ," 0 - E5" - >]" *
k T$

%&7 "(
,~ Œ / "% k ,G ‹ F" R S % 1C ' ,1 / " ,
1 ' ,~ 1 S) +& ' ,~ k Π+& ' ,~ Π,VW ' , ~ , - Π&1 -
k J &+" #, 1 , { ' , ~ - #,
', G / " * O1
E = f (x , y)
/ " 1# T Q $ dF9 X Z &1 - , ~ Y ˆ E
#, 1 ' ,~ $ dF9 X Z + & , ~ Y ˆ X
#, 1 ,{' ,~ $ dF9 X Z + & , ~ Y ˆ Y

0 &Y %&7
B &7T O# Q 0 &Y %&7
: k Q- ', G / " # )#, 1 , { ' , ~ ', G / " ? :
k. dF9 - * ' # ,1 ', G / " ?
h0 " L- : ' % M" l
, .9G0 1 N, Z6
E3P L0 Z;
! .S M < - > ZI
^ F 1 _P . & Z
 , .9G0 1 b Z
* ' '> ,1 Z(
OS '> ,1 Z•
% l, B '> ,1 Z
< '> ,1 Z2
, 1 , > ! < Z•
‘ 3" > ! < Z
B &7T c * O# Q 0 &Y %&7
C /A K k6
%& k;

- $ 1 #, 1 ,{ ' ,~ 0 ' 3" J Q Ex& C /A K .! T

k J1 / , ,~ 18 H 1 J\G b aA
b aA !- $ 1 #, 1 ,{ ' ,~ 0 ' 3" J Q Ex& %& .! T
k J1 , , ~ : 0 J\G
hC /A K = ,J ' L- - % M"
! / T .! T C /A = ,J $ J , ‹ ' % M" Z•
* L- Z
'0 J ' # Zb
', G / " .S ' S J ', G /B Z’
% '> ,1 0 ' Z^
 "# $ - X %& '
k 31 # &M ! T- x C ! T - 6777 .P h- .
6777 ZD!
6677 Z
;777 Z^
67777 Z
31 # &M ! T - 6; 7 1 C ! T - 6777 .P 1 . & ' ,P ,G
T - 6777 ,1 ,1 E3P L0 ' 31 # &M ! T - 6; 7 J ] J 1 b- " 1
k. # T C 0 !

$ . Q ', 9 1 > J 1 , 9 1 $, 1 N, C > w, k. , 0$ > $, 1 h: @

k J S .S , , 0

' # A C< .S , 0 1 - B @† $, 1 1 ! T - I7777 Z: P,G K -Y C / }, h- .

k. , 0 j,J 1 DE F

M- L V $3 @ " & O/ dH V $ : @ )!
6 ;4 7 ;I647
;7 ;(7 7 I; ;7
; ; 62 ; ;
I7 ;I72 I(47

8 =& w ,G J 0 .S , 0 1 b w, C 9 s P #- Q
k C9 ' HTa 1 8 >P S , $, 1 !- 1

$, 1 + ˆ ?,P - B + X !- +
 - $ 3 R3
L0 ' ,1 Q ' % M" E - . # B 0 # 0 L0
0 w M 1 &1 dF9 # + % .& C< K -. 9G 1 # 0
k 1 S b- C< L0 , e1 , dFJ S

[ ; ‡E 6(;( # : $, >Q L-,P DE F ' C 0 •( N, 1 [ ; L0 - .

kM, <C ƒS, = "

- "&( "# K 15 R3
6(;( ;
6(2( ;7@
62;( @6 I;
622( 6 44444;
6@;( ;2(I7;6(4
6@2( 7@4 ;@ 2(
64;( 4I2 4476 66
642( 62;(@@2( @ I@

- /\# : @b
31 # &M - 0 ‚ M1 ,S #- ! T - 677777 ‡E A . ,J - .
k / 5 $, 1 N, - $, 1 + k / .P % 10 ! T - 67(777 ‡E

$, 1 + ˆ ?,P - B + l !- , +

$, 1 + ˆ 67(777 l677777 ˆ (777

-
B U&T,1 $, 1 N, ˆ IJ. '((
K

6000
B U&T,1 $, 1 N, ˆ ∗ 100 = % 6
100000
 w # &M 0 ‚ k , e1 K - • N, 1 # &M ' ,1 ! T - ;77777 ‡E B . ,J h- .
k / .S , 1# +
$, 1 + ˆ;77777“Z• Y ˆ67777
?,P - B + ˆ;77777…67777ˆ;67777

k / 5 , 0 L- 0 C "
?,P - B ‡E ˆ !- ‡E “Z6…$, 1 N, Y

?,P - B ‡E ˆ;77777“Z6…• Y ˆ;67777

- $ 3 R3
' ) , e1 , dFJ % S 0 w M 1 &1 )# dF9 + %
k 1 S b- ' L0

-
kDE F ' C 0 ! DE F , + L0 '- &" 0 .&"
# ! T - 667 1 . ,1 ,1 J 1 •67 $, 1 N, M " B 0-, ! T - 677 a
o„
k0- : / $ <

II
"# JY3 @ b

ROR ˆ Z P ?,P - B l !- , Y † !- , ˆ † !- ,

"# JY3 @ b : @b '

,G }, K- . 0 )$, 1
k }, K- ' \G , . 0 )ROR

Rate of Return (ROR)

K- \G , $G 0 ',e - $ , G K - $ G 0 M !- k J 1 M ' ,H 0
k J1 $

( #N 0 $
Z PY I , E3P L0 !- , l6

Z FY I , $ < L0 ?,P - B l;

ZAY I(.S M - '- & < > lI

ZiY I2Z , .9G0 1 N, Y $, 1 N, l

ZnY I@$ - 3" l

( #N )\Q

< + ?# - ?# - ?# -
. L L.n

> – ' ) * n-' n

Present Worth
Future Worth
Uniform Annual Cost
Interest Rate
Number Of Interest Period
-[1 < k J $ C9 $ - , C ' / y OS b 1 > - <
k ,G , +P 5 : >
‚ %1 ! T - 77 # b 1$ <# 0 - ! T - 6777 0-, FJ - .
MJ k J 1 •67 $, 1 N, k.J S% 1 # + wK w# C /0
k / ! <,P

F=?
n= +
i=
M'( i=
F= ? M'(
( ' ) * +

A= A= A= A=
,(( ,(( ,(( ,((

P=
'(((

F P "e@

#- # C ”
F1 = P + Pi = P (1 + i )
K- # C
F2 = F1 + F1i
F2 = F1 (1 + i ) = P(1 + i)(1 + i ) = P(1 + i ) 2
F2 = P(1 + i ) 2

“ “ “
K n# C
Fn = Fn −1 (1 + i ) = P(1 + i ) n
 1
1) F = P (1 + i ) n 2) P=F
(1 + I ) n

P i=

n
( ' )
n ") n "'
F

k G .S , M P (6…i)n P 1 Z•
k G .S , M E3P L0 P 6 / (6…i)n P 1 Z

A P "e@
k J1 J $ - , ' '- & ' .S , ,G # T

P=?
' ) * i= n "' n
(

A A A A A

(1 + i) n − 1 I (1 + I ) n
P = A( ) A = P(
i (1 + i ) n (1 + I ) n − 1

.S M ', E3P L0 P , .P 0 1 P

A F "e@

(1 + i ) n − 1 i
F = A( ) A = F( )
i (1 + i ) n − 1
U , + ' ,1 '- & .S , P a $ Q- P
 ! -
(X / Y , i% , n)
$- 3"
$, 1 N,
K E3
# ]

+- .
(F/P, Ik77•, 6 ) = 6k @7
#- Q ' ' C
#- Q '[ 1
C , '[ 1

k -< S . 1 $ < L0 P C< ,* - E3P L0 : J 1

eV @#B
1-.
(A/P,•2†I , 67) =?
(A/P, •2 , 67) = 7†6 ;I@ = 7†6 ;
(A/P, •@ , 67) = 7†6 47I =7†6 47

M8 N'+)+
(
a N* c
b X=? d
M8

ME N'+9(
(
a/c=b/d a = 2†I – 2 = 7†I c=?
b= @–2=6 d = 7†6 47 – 7†6 ;
c = 7†7764@ X = 7†6 ; + 7†7764@ = 7†6 I@ = 7†77((
! - -

$ $ ! c -
- f c H
p F (P/F , i% , n) P=F(P/F ,i% ,n)
F P (F/P , i% , n) F=P(F/P ,i% ,n)
P A (P/A , i% , n) P=A(P/A ,i% ,n)
A P (A/P , i% , n) A=P(A/P ,i% ,n)
A F (A/F , i% , n) A=F(A/F ,i% ,n)
F A (F/A , i% , n) F=A(F/A ,i% ,n)

k. $ J . ,J 1 , 0 j,J 1 ' 9 k. # • ,J $ \Q N, T -.
C - J ' \G , T,A ! T - 7777 ‡E # 6 " ! / 31 # &M 0
k J1 1 w . ,J / " k J .P ! T - 6k777k777 ‡E # 6

( #N )\Q

F='O(((O(((
i= M,
( ' ) * + , 7 8 E 9 '( '' ') '* '+
',

A=
,((((

A= F(A/F, i%, n)
F= A(F/A, i%, n) = 7777(F/A, • , 6 ) = 7777(;6† 2@ )= 672@477 T-
m!

k.& ' Z. ,J . Y . ,J $ \Q N, T 1 Q " 1 ' \G , :

 k / 5 E3P L0 # •6 N, 1 , 0 ! <,P h- .

PT QP

' ) * + , 7 8 E 9 '( ''

') '*

A'= A)=',((
'(((

h T

PT=?
i=
M',
' ) * + , 7 8 E 9 '( '' ')
'*

PA'

A'=
'((( A)=',((
PA)
PA''=?
PA')=?

PT =PA6 + PA;
PA6= PA'6(P/F, •6 ,;) = PA6(P/A, •6 ,I) (P/F, •6 ,;)
= 6777 (;†;@I) (7†2 ()= 6†2;(
PA;= PA'; (P/F, •6 ,@) = A;(P/A, •6 , ) (P/F, •6 ,@)
= 6 77(I†I ;) (7†I;2)= 6†(
PT= 6†2;( + 6†( = I†I27 ! T-
 k. •67 $, 1 N, k / : 3" x + ,0' <,P h- .

*x *x *x
*x

)x )x )x
x x x

' ) * + , 7 8 E 9
'(

'((O(
((((

h T

P* *x *x *x
*x
P)
P' )x )x )x
x x x i='(M

(
' ) * + , 7 8 E 9
'(

PT='((O(((

PT = P6+ P; +PI

677777 = x(P/A, •67,I) + ;x(P/A, •67,I)(P/F,•67,I) + Ix(P/A, •67, )(P/F,•67,

()
677777 = x ( ) …;X( )( )…IX( )( )
X=
 gV0 (
V \# h&Q
U J .! T) 1 8 >P 8 .S M O1 $ - , Z < >Y ! <,P %
k -< Q 1 .S M

-.
),
(
))
,
)(
(
'8
', ,
G=),
(
')
,
'(
(

( ' ) * + , 7
8

P G 2&@ "e@

G (1 + i ) n − 1 n
P= n
−
i i (1 + i ) (1 + i ) n
P = G ( P / G, i %, n)

A G 2&@ "e@

1 n
A=G +
i (1 + i ) n − 1
A = G ( A G , i %, n)
 k J1 • \Q N, Tk / 5 ,0 <,P E3P L0 h- .

PT = ?

'+((
'*((
''((')((
'(((
E( 9(
8( ( (
7( (
,( (
(

( ' ) * + , 7 8 E 9 '(

k / %M ",0 <,P - 1 s P ! <,P

PA = ?

A=,(( &'

( ' ) * + , 7 8 E 9 '(
# -Š # k /$ U ,* 0 P - ! ,P 0 C 1 M ' ,1 .S M U J "\
k J1 , B #-

PG = ?

9((
E((
8((
7(( )
,(( &
*( +(
'( )( ( (
( ( G='((

( ' ) * + , 7 8 E 9 '(

P T = PA + PG
PT = 77 (P /A, • , 67) + 677 (P/G ,• ,67)
PT = 77(2†2;62)+677(I6†(; )=27;(†7

0
8 >P 3 B $0 1 $ - 1 . & .P .S , , ! <,P 1
k G ', J1 J 8

An
An-
A*
A)
A'

( ' ) * n-' n

! <,P MJ
At = Atl6(6 + j) t = ; , kkk , n
dF9 + # : !- l, B Š #
$, 1 N, ˆ i
, ~" B ˆ j
3! O $- # ˆt
t$ - # .P ˆ At
.P .S , : !- ˆ A6

At = A1 (1 + j ) t −1 t = 1,..., n
1 − (1 + j ) n (1 + i) − n
P = A1 i≠ j
i− j

(nA1 )
P= i= j
(1 + i)

P = A1 ( P A, i, j , n)

k < , 0 MJ 1 s P O1 J1 i#j- j=7 - j>7 ! T ' ,1

1 − ( F P, j , n)( P F , i, n)
P = A1 j≥0 i≠ j
i− j

, ,H . ,J : k 8 >P # •@ . ,J % & '-, ' > h- .

N, k / : z" $ < # " S & '-, ' > "$ / 0 ‚ %1 '
: k J1 ! T - 7777 . ,J $ < # & '-, > -. # •67 % 1
k /0 ‚ 1% 1 + w . ,J

A6= 7777

j = •@ - i = •67 - n =

P = A6 (P/A, •67, •@, )

P = 7777( †I@I6) = ;646 ! T-

k J1 1 +w . ,J 0 ‚ + J 1 J 8 >P •67 & '-, > ,G

i = j = 10%
nA 5 × 5000 ! T-
P= 1 = = 227272.73
1+ i 1.1
5?
DE b >4= 7 b

k $- 3" $ - , N, ,rEB T 0 .&" ) 7 b

•6“6; ˆ •6; ! •6 h- .

$- , 3 $- , C< C J U , 1 Q " 1 # 0 L0 0 .&" ) DE b

k J P,G ,H 31 $ - ' ,1 B C 1 $ - ?,P - B

ie= (6 + r/t)t – 6

$ - ,VW N, = ie

$- / N, = r

6
$- C JU , 3" = t

v. +w ! ,VW N, k J 1 •6 $, 1 N, ,G h- .

r = •6 “ •6; ! / N,

ie = ( 6 + •6; / 6;)6; – 6 = 6;†(@ ! ,VW N,

- '0- : w ,e # w ! T - I7777 - 0-, ! T - 67777 ,G h- .

) /0 ‚ %1 •( ! N, 1 0- : / ,e # 8J ! T - 6 777
%1 , '0- : w ,e # 67 ) J 5 M $ 8J , $, 1 M " B
k 1 S +w

Effective Interest Rate

Nominal Interested Rate
Number Of Compounding Periods
 F= ?

7 8 E 9 '(
' ) * + ,

'(((
(
',((
(

*(((
(
ie = (6 + 7†7( /;) ; - 6 = 7†7(74 = • (†74 ,VW N,

F = 67777(F/P, • (†74 ,67) + I7777(F/P, • (†74 , ( ) + 6 777(F/P, • (†74 , )

= 24†@I2

D b i 7 b
0 .! T : J 5 ! &M $ - , C ' \G , M" B
k J $ ! $, 1 N, jaB
- 5 # &M 0 8 1 ' EB P $ - : 1 .1 w $, 1 M" B
k J j,O / N, - ,V N, ' ! + J .S ,
5 b 3P 3" 5 b 3P 0 % , $, 1 N, ,rEB T 0 . b / N,
$-
5 b 3P 0 % , ?,P - B : P,G ,H 1 $ - % N, 0 . b ,V N,
' 31 3P ' ,1 $, 1
h# „

' ?# - ) ?# - * ?# - n ?# -

k J 1 •6; ! $, 1 N, - k J .S , - 5 $ , C - J 1 ! &M $ - ,G
•6 C $, 1 N,
•6; ! / N,
t
r
ie = 1 + −1 ! ,V N,
t

51
" &$ B Q h!

k.J S ', 9 1 8 >P ! ,VW N, ) J , 9 1 # C JU , 3" ,G

U , 0 8 / ,VW N, .! T : ,VW N, / . 1 1# $- 3" $ G,
k J $ C J

Continuous Compounding
F = P (6… r/t)tn

! / N, ˆ r

# C JU , 3" ˆ t

k J1 # 3" ˆ n

F= P lim (6… r/t)tn =Per.n

F = Per.n e = ;†26@;@
F = P(F/P, r, n)
C J U , 1 .S , M $ < L0 P

P = Fe –rn
P = F(P/F, r, n)
C JU , 1$ M E3P L0 P

ie=er - 6 k ,G 5 1 + O1 0 U , ,VW N,

J1# •6; $, 1 N, - /0 ‚ %1 ! T - 67777 FJ ,G - .

k.J S , + w # 6 0 ‚ ) ,G .S , b 1 $, 1 -

+R

•6; / 6; = •6 $, 1 N,

6 “ 6; = 6@7 $ $- 3"

F = A(F/A, •6 ,6@7) = 67777(F/A, •6 , 6@7) = ?

1R

Ie = (6…r/t)t –6 = (6 + •6;/6;)6; –6= •6;†(@

F = A(F/A, ie, 6 )

= 67k777“6;†(@

' \G , U , O1 # Z / Y •6; N, 1 ! T - ;77777 ‡E ,G h- .

Z?,P - B Y k 1 S +w , # 0‚) J

F= P(F/P, •6; , )

F= ;77777(6†@;;6) = I( ;7
 N @ ! 0 9& \
I
E3P L0 L- l6

! .S M L- l;

, .9G0 1 N, L- lI

^ F 1 _P . & L- l

% M" , l

0 9& \
H R3 R

k.J S C &M ] $f-, ' & + ' L- E •

0 +& 3 k J1 Œ G0 ' $f-, Œ L- : 1 & + ' $f-, •

0 1 $f-, , K] 0 ) J F ,Q ' ,1 < 0 M $G , - &
k J1

$f-, J1 $ \Q N, T ' 0 1 NPW Œd! S E3P L0 Œ ,G •

k J1 ' $f-, J 1 . „ ,G - ' ,{

NPW<7 ' , { $f-,

NPW=7 NPW>7 ' $f-,

k J1,/ 8 > PW . ," ' ' $f-, J 1 J $f-, w ,G

k @ @ :j $ 7* - (

k J1 •67 MARR $ \Q N, Tk / & + B- A:J - - .

Present Worth Method

++
Equivalent Uniform Annual Cost (Benefit)
Benefit to Cost Method
 A B

; 77 I 77 !- >

477 277 ! " E/ >

;77 I 7 y + L0

,/

PWA = ; 77 + 477 (P/A, •67 , ) – ;77 (P/F, •67 , ) = 2@@

PWB = I 77 + 277 (P/A,•67 , ) l I 7 (P/F, •67 , ) = 4I(

k J S F ,/ > E3P L0 : J .E31 A : J

@ @ :j $ 7* c (

,H $f-, ' ,1 , 9 ,/ 1 1 !k J / .! T L- :
1U - -< . 1 $f-, ,/ `, 9 ,r : , Mw H : ' ,1 k.P,G
.! T Ex& . - ,1 `, 9 ,/ : 1 " $ / ,M" $f-, :
k / T

- , / },P k. ," ' % F k / & + , 0 : J - h- .

J1 •6 $ \Q N, Tk J1 ,1 ,1 : J

A B

66777 6@777 !- >

I 77 I677 ! " E/ >

 6777 ;777 A + L0

( 4 ,/

k J1 6@ ( - 4 `, 9 ,r : , Mw

R@
'(((

'(((
SV='(((

A=*,((

''(( ''(( ''((

PWA= 66777 + 66777(P/F, •6 , () – 6777(P/F, •6 , () + 66777(P/F,•6 , 6;) –

6777(P/F, •6 , 6;) – 6777(P/F, •6 , 6@) + I 77 (P/A, •6 , 6@) = I@ 4

h B : J ' ,1

SV=)(((

'E
A=*'(( A=*'((

'E((( 'E(((
PWB= 6@777 + 6@777(P/F, •6 , 4) – ;777(P/F, •6 , 4) l ;777(P/F,•6 , 6@) +
I677(P/A, •6 , 6@) = 6I@
PWA<PWB J' ,S 1 A

k. , / !- > C w

k - 5 $f-, ,/ hc (

) $ G -,P ) $ G-, ) [ A ,/ $f-, ' ,1 L- : 0

k J $ kkkk - $ • >1 )

$ - 5 C 0b 1 !- ' \G , },P 1 [ < L0 5 L- :

k J

P‚ z" >

A [ <

n→∞
i (1 + i ) n
A=P
(1 + i ) n − 1

i (1 + i ) n
lim A = P lim = Pi
(1 + i ) n − 1
n→∞
A = Pi → P = A i

1 8 k. $ J 9 b % ] j,A - % ? > 1 ,1< ' ,1 h- .

’ T - .S > ,G k J ] < ! T - ;7777 ! b ’ T0‚ J
- , /3" > eu ’ T 0 ‚ b : J },P - J 1 ! T - I 7777 b
• , .9G0 1 N, T k. ' $f-, : K ] < k K0[ ' e
k J1

PWB

A 20000
P= = = 400000 350000
i 0.05

k. ' j,A : K ]
 EUAC , EUAB " K M V \#L - R

.S M ', % 1 T $ , $f-, 1 = ", ' > - < E L- : •

k J " [ # 3

N, - j,A ! C ,Q b aA 1 Z L- , Y L- : 0 $ .Q •
k J 1 :J- a
o $, 1

L- , 0 ," C < - , 3 , . ,1 ,1 $f-, ,/ ! T ' ,1 L- : •

k J1 i& T ' e1 Q

k J1 j,A > - < E ' ,1 [ L0 5 BaS O1 •

- R

k ,G },P

P= j,A !- >

n= j,A ,/

SV = y + L0

k -< . 1 kkk - j,A y + L-,P 0 B T < - E3P > ! L0

EUAC= P(A/P, i%, n)-SV(A/F, i%, n) + …

k. ! T - 777 C< y + L0 - ! T - @7777 : J % ,S > - .

J1 ! T - 4777 [ : J " E/ > ,G k J 1 # @:J : ,/
k / 5 :J : ! .S M > ) J },P •( $, 1 N, -

EUAC= @7777(A/P, •(,@) + 4777 – 777 (A/F, •(,@ )= ;6I@7

c R
 ] ‚ƒ - $ / " E3P L0 1 j,A ' < - > E L- :
k / " ! .S M > 1

c R

!- > 1 < - > , - A + L0 aS 1 L- :

L0 ,rEB T . -$ / ,* (A/P,i%,n) P B T - : 3"
k / P * C< 1 - $ -< . 1 $, 1 N, < - > , - A+

" &( V \# " #C k# T 3 :j $ W "/# <

) -< . 1 < 0 %, ! > 1 )$f-, w & + ' ,1

k 1 S $f-, : ," ' J1 [ > :,/ ' ' $f-,

,S k / & + •6 $, 1 N, y,J 1 EUAC L- | ,A 0 ,0$e - -.

k / B " %

A B

;(777 I(777 ,S >

@77 I77 [ b , /3" >

66777 4(77 [ E , >

;777 I777 A + L0 >

( 67 ,/
EUACA = ;(777(A/P, •6 ,() – ;777(A/F,•6 ,() + 66777 + @77 = 6@ ;

EEUACB = I(777(A/P,•67,67) – I777(A/F,•6 ,67) + 4(77 + I77 = 6(4;

k. EUACB < EUACA ,0 J B "B$e ,S

(i) "# JY3 @ b R

ROR= Rate Of Return

MARR= Minimum Attractive Rate of Return

A 1, ' . 1 Q " 1 j,A % ' \G , .Q ,J C 0 ,

k J 1 , 9 1 E T % 0 ' \G , : 0 J / K " B
h \!

,G ROR > = MARR J P, \ j,A

,G ROR < MARR J / P, \ j,A

/ " C< 0 ‚ - 5 , .9G0 1 N, 1 j,A % ' \G , ' ,1 ‚

k < /31 ', G

E3P L0 L- 0 $ 1 ROR 5 +R

. 1 > E3P L0 1 < E3P L0 C , '- &" 0 , .9G0 1 N,

k <

NPW=7

PWB=PWC PWB – PWC = 7 i = ROR

 h]

-P +A(P/A, i%,n) + SV(P/F,i%,n) +…=7

,e # ! T - 77 .P -C ! T - 6777 ' \G , +-.

k / 5 , .9G0 1 N, ),e # • ! T - 6 77 -

l 6777 + 77(P/F,i%, I) +6 77 (P/F,i%, )=7

i" G R

Z| ,+" O1 U ,* 5Y Q T l6

OS - 3 l;

1 C- lI

k J1 i =•6(†4 # „ : k J1

k , e1 ,H ,0 ! <,P 1-.

, C - # 67 b 1 ! T - 677 .P -C ! T - 777 ' \G ,

k / 5 , .9G0 1 N, # 67 C ! T - 2777 .P -#

h T

P= k777

N=67

A= 677 [ <
F= 277 i <

F=8(((
A='((

' ) * + , 7 8 E 9 '(

P = ,(((

l k777…677 ZP/A , i• ,67Y …2777 ZP/F , i• ,67Yˆ7

Z# 0 L0 : P,G ,H C- 1Y #+ # ' 1 [ < : /F" ' ,1

Fˆ67“677…2777ˆ@777

777ˆ@777 ZP/F , i• n,Y

ZP/F , i• n,Y ˆ 777†@777 ˆ 7†(;

#- Q 1 3Q , • –i–•

k / 1 C- C " ‚k J BTb

• (4† (

a i b 7

c d
 •( l I †64

a c
=
b d
a 6% − 5%
= → a = 0.16
69.46 − 355.19 − 69.46
ROR = i = 5 + 0.16 = 5.16%

! .S M L- 0 $ 1 , .9G0 1 N, 5 l; L-

NEUA=7

NUAB=EUAC EUAB-EUAC=7

h]

-P(A/P,i%,n)+A+SV(A/F,i%,n) +7777=7

0 N #

N, )$, 1 N, ˆ i

' \G , j,A % J ,* T \G , % ' N, T ˆ MARR

k /

k J B T ' \G , %0 ' N, ˆ ROR

k / ' \G , j,A \G , k J 1 ROR MARR ,G

k / / ' \G , j,A \G , k J 1 MARR–ROR ,G

ROR L- 1 $f-, w & +

d! S L0 Y NEUA - Zd! S E3P L0 Y NPW ' J- 1 b- " L- :

k Z ! .S M
#- $f-, o >! J 1 (B) ,e $f-, 0 , 9 1 (A) $f-, % ROR ,G L- :
0 1 L- : 1 $f-, ' & + ' ,1 k J 1 / ," ' (B) K- $f-, 0 (A)
k /$ P * ' \G , E5" - >]" C .5" L-

5m
; 0 lY "# )&HG "#Cf

h $ / k , e1 ,H b- !- > 1 G0 $f-, -

, 9 1 !- > 1 $f-, = , / !- > 1 $f-, + $f-, - : 1 !- > b- "

PWX PWY NPW

—F $f-,— : ,—" ' — C 31 , 9 1 !- > 1 ' $f-, )$f-, - : 1 0 ,G E O1 l6

MARR 0 , —9 1 — ,—1 ,1 9G0 1 N, " 1 S $f-, " / C " J
k.J S ,< 0 , 9 1 MARR ,1 ,1 9G0 1 N, > $f-, - : 1 b- " ME1
k J F , 9 1 !- , 1 j,A 7 ˆ – NPW
k J F ,/ !- , 1 j,A 7 ˜ NPW
k J F , 9 1 !- , 1 j,A 7 ˆ – NEUA
k J F ,/ !- , 1 j,A 7 ˜ NEUA
. K] 1 " 5 - / ," b B - 1 P * ' \G , E5" - >]" L- t ,9"
k

7& R @
$f-, w - ' ,1 < E3P L0 - > E3P L0 1 L- :
< - > 1 y 1, y + 3 $ / < b F ‚ƒ k / 5
b- " =S ,e M 1 y + : # " 0 k / dF9 b F 5 B '- $f-, ,
k ,G BT
,G ,H , 0 j,A l; # „

PWBX PWBY PWBZ PWBW

X Y Z W
PW
Extra Inuestment Analysis PWCY
CX PWCZ PWCW
 k i / : 3" $f-, : ," ' / ," L- 1
PWB
h T

NPW=(
PWBZ Z MARR=a%
PWBY Y

PWBW W

PWBX X

PWCX PWCY PWCZ PWCW PWC

MARR=a%

,G ROR MARR Q =S '[ 1

ROR MARR Q =S :
k ' Z-Y-X
k J1 / ' W

> 1 Q " 1 Yj,A . Q 0 81UJ' XY =S C w h X,Y & +

k. ," ' ,"[ 1 !-
> 1 Q " 1 Y j,A . Q 0 ,/ UJ' YZ =S C w h Z,Y & +
k. ," ' ,/ !-
 '- & ). b- " , .9G0 1 N, .+ +T b- " =S - 0 U ,* ,G
!- > 1 $f-, b ,{ - , 9 1 !- > 1 $f-, J 1 $ \Q N, T0 81
k J F ,/

k Q@ ] #@ #3 \ "# JY3 @ b R
C 1' " $f-, C< , .9G0 1 N, 5 - " 1 $f-, , ,1 l6
k / : 3" MARR $ \Q N, T & + 1 ,<
o >! / & + F1 , .9G0 1 N, L- 1 Q " 1 $f-, w - $ G, l;
ME1 ) J 1 / J 1 J ', 9 1 .9G0 1 N, ' $f-, C< )$f-, : ," '
' Q ' $f-, : 1 0 P * ' \G , E5" - >]" % M" 1 1
k / F < : ,"
' . ," ' ' $f-, J 1 ,1 ,1 $f-, E !- > M" B lI
k J1 , .9G0 1 N, : ,"[ 1
,G k J & + 1- 1- $f-, ) J ,1 ,1 $f-, !- > M" B l
', 9 1 !- > ' $f-, 1 MARR 0 8 1 b- " , .9G0 1 N,
," ' . ', / !- > ' ' $f-, b ,{ . ," '
k J1

' , 0 j,A - 0 P * ' \G , E5" - >]" / ," L- 0 $ 1 h+ - .

k J1 •67 $ \Q N, Tk / dF9 < : ,"

X j,A Y j,A
;77 277 !- >
4 6;7 ! <
7 6 7 A + L0
( 6; ,/
 k ,/ b- " 1 Q " 1 $ - - 5

j,A X PWC= ;77 – 7(P/F,•67,()+;77 (P/F,•67,() – 7(P/F,•67,6;)

= ;(4
PWB= 4 (P/A,•67,6;)= ( 2
j,A Y PWC= 277 l 6 7(P/F,•67,6;)= ( ;
PWB= 6;7(P/A, •67, 6;)= @6@

PWB
E'E NPW=(
E(( Y
'(M
8(( .
+, S @
7(( 7+8 T#-
,(( X

+((
*((
)((
'((
(

)79 7,)

,(( 7(( 8(( E(( PWC

'(( )(( *(( +((

B " ‚ k. $ 1 J 1 Q ,1 ,1 MARR=67• U J 0 , / XY =S U J
k JK] ,/ !- > 1 j,A J
,B < A + L0 - # ;7 e/ ,/ k , G ,H , 0 j,A h; # „
k. •( $ \Q N, Tk J1

PWB= 27I
Xj,A
PWC=;777

PWB=2I;4
Yj,A
PWC= 777

PWB=@7;4
Zj,A
PWC= 777
k. ," ' j,A K

PWB NPW=(
7M= MARR
E(( Z
Y
(

7(( C’
( X B’

+((
A’
(
)((
( 7((( PWC
)((( +(((
 , ‚ k Z. Q 0 8 1 < U JY • ( 0 8 1 , .9G0 1 j,A , l6
k J1 ' <
k. ," ' Y ‚ k. Q 0 8 1 XY =S U J l;
. ,/ > ' ' $f-, 3 Y $f-, ‚ k. Q 0 , / YZ =S U J lI
k J F

< : ," ' - & + / ," L- - , .9G0 1 N, L- 0 , 0 ' $f-, hI # „

k / dF9
n= ;7 , MARR= • (
k / U", !- , ' 3B U "," 1 $f-, 1

D B A C E
PWC 6777 ;777 777 (777 4777
PWB 6627 677 (I47 2(67 2@ 7

PWB

9((( NPW=(
8E,
E((( MARR=7M
8((( E
887' C
7((( (E,(
,((( 7*9 A
+(((
*((( +'(
B
)(((
'(((
(
D

,((( 7((( 8((( E((( 9((( '(((( PWC

'((( '((( )((( *((( +(((
 k J1 A j,A )j,A : ," '

k ,G , =S C< '- MARR - . 5 '- Q =S ) NPW=7 =S h6 M

k J1 ' , { C< : -' s P =S '[ 1 ' $f-, h; M
k J P,G ,H /: < E3P L0 - > E3P L0 hI M
Z NPW=7 =SY k , G , =S : '- PWC=PWB $f-, h M

G R
h, 0 U "," 1 , .9G0 1 N, L- 0 $f-, ' & + 0

k J U", ' 3B U "," 1 !- > U&T,1 $f-, l6

k J 5 $f-, , , .9G0 1 N, l;
C< ) 1 (MARR) $ \Q N, T 0 , / ' $f-, , .9G0 1 N, ,G lI
k ,G \T & + 0 $f-,
1- 1 - ) P * ' \G , E5" - >]" L- 0 $ 1 U ", 1 $f-, l
k J S J $f-, : ," ' " J & +

.9G0 1 N, L- 0 - P * ' \G , E5" - >]" 0 $ 1 , 0 ' $f-, h- .

MARR=(• - # ;7 $f-, E ,/ k / dF9 < : ," ' - & + ,
k.
A B C D E
777 ;777 (777 6777 4777 !- >
(I4 67 2(6 662 2@ ! <

k / U", ' 3B U "," 1 $f-, 1h T

D B A C E
6777 ;777 777 (777 4777
662 67 (I4 2(6 2@
! < !- >
 k K] B-D:1 & + 1
6777 !- > b- "
;4I ! < b- "
;777l6777ˆ6777 67l662ˆ;4I
6777= ;4I(P/A, i%, ;7) ROR=•;4

k ,G F , 9 1 !- > 1 B $f-, \! k. •( 0 8 1 b- " , .9G0 1 N,

A B "/# <

!- > b- " ;777

ROR=•67
! < b- " ;;4
k ,G F A $f-, \! . •( 0 8 1 b- " , .9G0 1 N,

C A"/# <
!- > b- " ;777
ROR=•;
! < b- " 6;4
F A 3 ,/ !- > 1 $f-, \! k J 1 MARR=•( 0 , / , .9G0 1 N,
k ,G \T C -

E A "/# <
!- > b- " 777
ROR~ •7 c
! < b- " 6 (

k ,G F - J1 ,1 $f-, : 1 $f-, : ," ' C 31 A $f-, ‚

 o Z "@ n R
k < . 1 > 1 . & 0 $f-, % C 1 ' 8] 3 L- :

B / C = (_P – ,* ) / Z^ F Y >
k J _P 0 ME1 J / P * > 1 ,* J $ 9 M O/

E3P L0 l#- L-
(B/C)= (_P PW / ^ F PW) = (PWB / PWC)
! .S M L0 lK- L-
B/C= _P EUA / ^ F EUA = EUAB / EUAC
s P ' L- 0 % ,
,G B/C > = 6 B-C > = 7
k. ' $f-,
,G B/C < 6 B-C <7
k J1 / ' j,A

k. $ ,G 9 ,0 F9 1 $f-, 3 B j,A % K ] ' ,1 h# „

!- > 6777777 ! T- Z >Y
6 ! < 6 7777 ! T- Z_P Y
! > 7777 ! T- Z >Y
! ,* I7777 ! T- Z ,*Y
; ! < 677777 ! T- Z_P Y

k. ' $f-, : K ] < k J 1 •67 $ \Q N, T - # ;7 j,A : ,/ ,G

B EUAB 100000 + 150000 − 30000
= = = 1.3135 1 k. ' j,A
C EUAC 1000000( A P,10%,20) + 50000

k J , \ j,A ' e - ] ' ,1 o/ + & 31 " #C

k J B T j,A ] ,V < n
 / y 1, o/ + & j,A S 1[
o /3 - - : 1 0 j,A ] ,V ' Q _P ;
k J1

P * ' \G , E5" - >]" 0 1 < & + ' ,1 J 1 J j,A w - ,G

h 3 k /$

B / C = PWB / PWC
B / C = EUAB / EUAC

k J F . , 9 1 !- > ' T,A J 1 ( B / C) ˜ = 6 ,G

k J F . ,/ !- > ' T,A J 1 ( B / C)–6 ,G -

:3 j,A : ," ' ^ F 1 _P L- 0 $ 1 , 0 G0 ' j,A C 0 h# „
k /

A B C D E
6777 ;777 777 (777 4777 PWC
6I 7 277 2II7 @2I7 4777 PWB
6†I ;†I 6†@I 6† ( 6 B/C

k $ J U", Z !- > Y , ' 3B U ", 1 j,A

A- B & + - ,1
PWC= 6777
PWB= II(7 B / C = I†I( ˜ 6 J F B
B-C & + - ,1
PWC= ;777
PWB= ;(I7 B / C = 6†I; ˜ 6 J F C
D- C & + - ,1
PWC= ;777
PWB=6 77 B / C = 7†27 – 6 J F C
E- C & + - ,1
PWC= 777
PWB=6(27 B / C = 7†II – 6 J F C

.& :,91' j,A : J . k ,G F $f-, : ," ' C 31 C j,A

k J1 j,A : ," ' !- J 1 / ^ F 1 _1
 5_
pa
C "- J - 8+ $f-, ' & + ' ,1 E 0 M
k J1 `a $ , ,1

hD ,3"
, 1 DE F C 0 - % L0 aS " 1 % L0 8
k G `a J 1 P,G b B L0 8 : E!

pa )#K
Z M",w X &T : J X ," ƒ Y 'f ! M" .P,9 l6
Z i 8 )b , /3" )' e >Y G ,P l;
Z: J ,P - ^-0 `a Y b ,+ b , ~" lI
Z &1Y K->! ‚ -, ? - + , ~" l
Z -,M s Q Y Q - ! b &S ] l

5q
0 R3
C< !- > L0 0 .&" C 0, % ', P L0 hD ,3"
kC 0 C< " `a ‡! ? /] ,& 8 0‚

pa " G 0 Q
%&< / OV R ,+
5 , 0 O1 | A - J P,G ,H .1 V ! `a + L- :
k ,G
D = (P-SV) / n
! `a + =D
- !- > =P
A + L0 = SV

Depreciation
Book Value
 Z ,/ Y `a ,/ = n
k ,G 5 , 0 O1 0 # m 0 ‚ ', P L0
BVm = P-m.D m= 6 , ; , I , … , n
A + L0 - # 67 Z a Y ,/ 1 ! T - @7k777 : J % !- > h- .
k / 5 # 0 ‚ ', P L0 - ! `a + k. ! T - 67777

P − SV 80000 − 10000
D= → → 7000
n 10
BV5 = P − 5 D = 80000 − (5 × 7000) = 45000
! T-

m= 7 BV7 = P = !- L0
m= n BVn = P- nD = SV A + L0
BVm= BVml6 – D $ - ', P L0 1 Q " 1 ', P L0 5

5=
c n7 R ,1
. & % U&T,1 - + : , 9 1 #- # `a + L- :
k `a : , / ,S< # MiQ " 1 8 dF9
n − m +1
Dm = ( P − SV )
SYD
M = 1,2,..., n

m# `a + = Dm
Zkkkk - : J )$ e Y $f-, ,/ = n
,1 # =m
j,A Z !- > Y !- L0 = P
j,A y + L0 = SV

Sum of the years Digits Method (SOYD)

 n
n(n + 1)
SYD = m=
m =1 2
b K _/Q

0 R3 ,4
P − m ( n − ( m 2) + 0.5)
BVm = ( P − SV )
SYD

T - 67777 y + L0 - # 67 ,/ 1 ! T - @7777 : J % !- > h- .

K _/Q L- 0 Y / 5 K- # ' ,1 ', P L0 - `a + k. !
Zb
(SOYD)
P = 80000
n = 10
SV = 10000
n(n + 1) 10 × 11
SYD = = = 55
2 2
n − m +1
Dm = ( P − SV )
SYD
10 − 2 + 1
D2 = (80000 − 10000) = 11.455
55
m(n − (m 2) + 0.5)
BVm = ( P − SV )
SYD
80000 − 2(10 − (2 2) + 0.5)
BV2 = (80000 − 10000) = 55.818
55

6?
( C 0 R ,5
# ', P L0 .1 V N, % ,rEB T 0 # , `a + L- :
k < . 1
Π1- !-> ' Q L- ΠL- : J P,G ,H ;/n .1 V N, : ,G
k ,G , #- ' ! `a + : , 9 1 L- : . t* - k

Declining Balance Method (DB)

Dm = BVml6(d)
BVm= P(6-d)m
Dm = d.P(6-d)ml6
.1 V N, ˆ d
k J1 ' J- ' , ) , ,
,1 ,1 ' ,1 E ! \! - `a , + 5 9+ A + L0 L- :
k Q- A + L0 1 ,S< # ', P L0 C J
k J 1 ,S< # ', P L0 ,1 ,1 A + L0 F1 ,G
SV= BVn = P(6-d)n
SV/P = (6-d)n
d = 6- (SV/P)6/n
L- 1 J 1 7†6@@ .1 V U ,* M " B # „ ' ,1 `a - ', P L0 h- .
k / 5 K w # ' ,1 !-> ' Q

P = @7777
n = 67
Dm = d.P(6-d)ml6
D = 7†6@@ “ @7k777(6 –7†6@@ ) l6 = @†474

BVm = P(6-d)m
BV = @7777(6 –7†6@@) = I †224
6+
!a : R ,6
• 1 31 ' ! - + : , / #- # `a + L- :
L0 - `a + k.J S `a + : , 9 1 ,S< # - 1 8 >P
k J 5 , 0 =1 - 0 L- : ', P

Dm = (P-SV) (A/F, i%, n) (F/P, i%, ml6)

BVm = P-(P-SV) (A/F, i%, n) (F/A,i%,m)

Sinking Fund Method

1 ! T - A ‡E ! C " # n ,/ 0 ‚ >e Q ' ,1
, ! T - (P-SV) ‡E $ - C " / 0 ‚ (i%) $ \Q N, T
k J1 J Q ". Q

A = (P-SV) (A/F, i%, n)

! T - 67777 C< A+ L0 - ! T - @7777 : J % !- > -.

$ Q- L- 0 ) J 1 # •67 $ \Q N, T - # 67 ,/ ,G k J 1
k / 5 K w# ', P L0 - `a + a

D = ( @7777 –67777 ) (A/F, •67 , 67 ) (F/P, •67 , I) = @ († ;

BV = @7777 – ( @7777 –67777 ) (A/F, •67 , 67) (F/A, •67 , ) = 4(6 7

&( R ,m
+ k J P,G ,H `a .1 V + % ! " T - , ' ,1 L- :
$f-, ,/ H ! " 3" 1 # C< ! " 3" . & 1 ,1 ,1 # , `a
ky + L0 - !- > b- " 1,*

Dm= (P-SV)Um / U
m# ! " = Um
H ! " =U

&H7* R ,m
k J P,G ,H " E/ . 0- , ' ,1 `a 1V + L- :
Dm = (P-SV) (Qm / Q)
m# b E/ b = Qm
,/ # A b E/ b =Q
 pa R Z
M" B k " ! Q P,B 8+ U `a L- F
h, 0 =1 - 0 $ 1 J1 J / ' 0< `a 5 L- F

n
PWD = Dm (P/F, i%, m)
m=6
h -
EUAD = PWD(A/P, i%, n)

k / 5 DE F ' J- 0 `a , + .S M L0 E3P L0
k. L- : ," ' J1 J EUAD PWD : ,"[ 1 J-
P,BΠ,H 0 C9 ,91 ,/ !- ' ! `a + J-
k. L- : , 1 Π" ! Q

L0 k. $ J ' ,S ! T - 7777 > 1# @ ,/ 1 L ," : J % h- .

) 9J # : J : ', P L0 - `a + k J1 ! T - 67777 C< y +
Z$,/ Y b K _/Q L- 1 ZD!
1- !-> ' Q L- 1 Z
k / 5
v ,w v. ," ' L- K Z^
 &( pa B 7 r G( @ 0 )&HG "#Cf
- `a b ,V : P,G ,H C- 1 $f-, ' & + - E5" - >]" C "
E5" - >]" - ,1 1 \ C / c 5! 1 P: k ,G ,1 b !
k 0 , ' ' $f-,

61
(TX) &(
1U +T - + +T R FJ < ,1 !- Q- 0 .&" b !
k / \S A 1, : - b ,+ | A - < C >

64
(GI) U( V N ,
kZkkk - b S-[ JY ! L-,P 0 B T < 0 .&" d! S <

65
(GFAT) U( V N ,
- `a ) " E/ ' > ,& 0 ‚ d! S < 0 .&" d! S <
kb !

66
(OC) &H7* 0 " #C ,
> , - 'f, ) & '-, ) 1 y 1, ' > 0 .&" " E/ ' >
k ! '

6m
(TR) &( b ,
k ,G : 3" U&T,1 b ! ' ,1 .!- = " . S,

&( /! 3 @ ( #N # U( V N " G R
Cash Flow After Tax (CFAT)

b ! ,& 0 ! <,P 5 Z6

(TX) TAX
Gross Income
Cash Flow After Tax
Operating Costs
Tax Rate
Cash Flow Before Tax
b ! 0 ' <,P = d! S < – " E/ ' >
CFBT = GI – OC
`a 5 Z;

2
(TI) b ! # /9 < 5 ZI
b ! # /9 < =b ! 0 ! <,P – `a
TI = CFBT – D
TI = GI – OC – D

(Tax) b ! 5 Z
b ! = b ! # /9 < “ b ! N,
TX = TI .TR

(CFAT) d! S < 5 Z
d! S < = b ! ,& 0 ! <,P l b !
CFAT = CFBT – TX
CFAT = CFBT – (CFBT – D) TR
CFAT = CFBT (6-TR) + D.TR

$ , 0 ' J- 0 M C " $f-, ' E5" ' ,1 s P ,1 1 Q " 1

k ,
(NPW) d! S E3P L0 L- Z6
n
NPW = - P + CFATj (P/F, i%, j)
j=6
k J1 ' ,{b ,{ -. ' $f-, J 1 NPW 7 ,G

(NEUA) d! S ! .S M L- Z;
NEUA = NPW (A/P, i%, n)
k. ' , { $f-, b ,{ -' $f-, J 1 NEUA 7 ,G

Taxable Income
 Zd! S E3P L0 Y , .9G0 1 N, L- ZI
NPW = 7
n
-P+ CFATj (P/F, i%, j)=7 i=?
j=6
i MARR '
i<MARR ' ,{

Zd! S ! .S M L- Y , .9G0 1 N, L- Z
NEUA = 7
NPW(A/P, i%, n) = 7 i=?
i MARR '
i<MARR ' ,{

k /$ P * ' \G , E5" - >]" 0 . K0[ J 1 J $f-, j,A w ,G

h. Q , 0 j,91 ' $f-, h- .

P= 7777
SV= 7
N=
K= 6, ;, I, ,
(GI) ! < = ;@777 –6777 K
(OC) ! > = 4 77 + 77K
! d! S < [
o- k J },P • 7 b ! N, - + & =S `a L-
v. ' $f-, : < J P,G ,H •2 $ \Q N, T ,G o V k / : 3"

> `a 5 k C9 CFAT d! S < 5 T , , 0 #- Q h T

k. $ J $ C 9 #- Q
 #- Q j,J Za
#- Q ,S< C 1 Q "1 5 Zb

GI-OC CFBT-D TI.TR CFBT-TX

Z6Y Z;Y ZIY Z Y Z Y Z(Y Z2Y
GI OC CFBT D IT TX CFAT
# ! < ! > ZIYˆZ6YlZ;Y `a Z YˆZIYlZ Y Z(Yˆ7† Z Y Z2YˆZIYlZ(Y
7 l 777 l 777 l l l l 7777
6 ;2777 67777 62777 67777 2777 ;@77 6 ;77
; ;(777 67 77 6 77 67777 77 ;;77 6II77
I ; 777 66777 6 777 67777 777 6(77 6; 77
; 777 66 77 6; 77 67777 ; 77 6777 66 77
;I777 6;777 66777 67777 6777 77 67(77

n
NPW = - P + CFATj (P/F, i%, j)
j=6
NEUA=NPW(A/P, i%, n)

h.J S J$ , 0 O1 0 u w
NPW= - 777 + 6 ;77 (P/F, •2 , 6) + 6II77(P/F, •2 , ;) + 6; 77 (P/F, •2,
I) + 66 77 (P/F, •2, ) + 67(77 (P/F, •2, )
h , 0 O1 -
NPW= 6I 7†@6 7 . '
NEUA= 6I 7†@6 (A/P, •2, )
NEUA= I;2 7 . '

k. ' •2 $ \Q N, T 1 \ $f-,

,G k J 1 ! T - 67777 C< A + L0 - ! T - 677777 ' $f-, !- > h- .

b ! N, - J 1 # ! T - ;7777 ,1 ,1 b ! 0 ! <,P - # 4 $f-, ,/
=S L- 0 `a ' ,1 v, S . ' $f-, : < / ,1 , e1 ,H • 7
k / },P •67 $ \Q N, T-$ / $ +&

h)
k M9" b ! 0 31 #- Q

- CFBT D TI TX CFAT
7 l677777 l l l l677777
6l 4 ;7777 67777 67777 777 6 777
4 67777 l l l 67777

k d! S E3P L0 O1 0 $ 1
l677777 + 6 777(P/A, i%, 4) + 67777(P/F, i%, 4)=7
ROR= •2†2
k.& ' $f-, ) J 1 ROR<MARR hC w
 0 0 @ &( pa I<

k. ," ' j,A - , 9 1 j,A J 1 , / b ! N, w, E O1 l

" ! Q P,B : , 9 1 J F 1 J- )`a L- F 1y " l

k / ]
j,A '- `a DE F ' J- ,V 1U `a L- F ' ,1 ! :/ 1l
k / F L- : ," ' - , 8 0<
d F" K>E & `a DE F ' J- 1 j,A % ' ,1 P,A 0 l
k / H : ' ,1 '," $ $ 1 ] k J1 ' 0 > ] -C 0

(TS) 6q &( # " X

" ! N, `a + ,rEB T 0 .&" # , " ! Q P,B
k.
CFAT=(GI-OC)-(GI-OC-D).TR
=(GI-OC)-(GI-OC)TR+D.TR
=(CFBT)(6-TR)+D(TR)
TS=D(TR)

k‚M3! 1 - 1 8 >P d! S < 1 8 >P D ,G .& < ,e 1 , S O1

P * d! S < 1-$ J Q P,B b ! .S , . ' + D(TR) .+ +T
k. $ ,G
- `a ' J- & + - $f-, % ,/ # A " ! Q P,B 5 ' ,1
. 1 J- : " ! Q P,B E3P L0 1 L- : ," ' F .
k J1 " ! Q P,B E3P L0 + :,91 >G,1 J- . - -<
h0 .&" " ! Q P,B E3P L0 5 E O1

n
PWTS = Dm (P/F, i%, m) (TR)
m=6

Tax Saving
 0 0 @ c D
.P !- ' \G , ' ,1 (i) $, 1 N, 1 K - C 31 ~E $f-, % K ] ' ,1 ,G
k 0 , C< ,1 1 P: .J S' E5" " ,V k J
k ,G .S , # , ' J M9" 8F1 - 0 ! =&
PR ˆ 4 B Z6
I ˆ (7$, 1 Z;

k J 5 , 0 | ,A 1 .! T : d! S <
CFBT=GI-OC
TI=CFBT-D-I
TX=TI.TR
CFAT=CFBT-TX-I-PR

0 S , $, 1 + ,0k J , 9 1 E3P L0 - , .9G0 1 N, .! T :

k b ! Q P,B 8+ `a \! - J b ! # /9 <

k J1 J 8 d! S E3P L0 . :M/ J 1 0 K - $, 1 N, ,G L- :
5 % 1 = ,J . 0 31 d! S E3P L0 1 j,A , BaS O1
k. P,B 1 C-,+ K - .P C 9 8 >P K - & T 1 L0 : M " B ) /

k. ,1 # T , 0 b F9 1 T,A h- .
! T - 6 777 !- > Z6
! T-7 y + L0 Z;
# ,/ ZI
! T - 2777 ! d! S < Z
! T - 6777 " E/ > Z
+ & =S `a 5 L- Z(
TR =• 7 b ! N, Z2

Principle
Interest
 MARR =•6 $ \Q N, T Z@

k / 5 , .9G0 1 N, ZD!
- PR=6 77 )Z$ O1Y •67 ! $, 1 N, = ,J .5" % 1 = " !- > • 7 ,G Z
k / 5 , .9G0 1 N, .! T : k J 1 I=2 7
v ,w v. ' $f-, : K ] ' ,1 K - .P < Z^
,A(
15000 − 0
D= = 3000
5
Any year = GI-OC = 2777l6777ˆ(777

# CFBT D TI TX CFAT
7 l6 777 l l l l6 777
6l (777 I777 I777 6 77 77
2777l6777ˆ(777

l6 77 … 77(P/A, i%, )=7 ROR= •6 †;

NPW= @ †4
MARR= •6
M
6 777 “ • 7 ˆ 2 77 ˆ K - C >
I= 2 77 (•67)=2 7
PR= (2 77) / = 6 77 $ O1

- CFBT D I PR TI TX CFAT
7 l2 77 l l l l l l2 77
6l (777 I777 2 7 6† 77 ; †; 7 6†6; ;†(;
CFAT = (777lZ66; …2 7…6 77Yˆ;(;
NPW= 7 l2 77 + ;†(; (P/A, i%, )= 7
i= ROR=•;;†;;

Mo
, 9 1 D! .! T 1 . & , .9G0 1 N, - d! S E3P L0 k J $ 9 M O/
k. ' $f-, : \ = ,J 1 K - .P ‚ k. $ J

m+
#C[# C&( N
' ]1 Q % ', G M1 ' ,1 >e Q E5" - >]"
k J1 Z. $ J y + - $ ,C 1 C< ,/ 0 Y Q

m1
[ /J 3 @
: 1k G C< e &9 0 1 % C , ^ S$ 0 - : J \G
k J saA (I_P j,A J J \G . ,

m5
#C[#
>e Q K] E C/ Q % ', G M1 - $
(
k G U j,A Q : 1k G

" #C ) "@ " @0 7* 2&&

> MiQ ") % ,/ 0 $ / 1 ' ! 3" 5 p5 :
,„ T ", B0 Z $ / 1 ,/ Y n + U "," : 1 k J 1 ). 8 1-
Z - $ / 1 ,/ Y n , + 0 % , ' ,1 - 8 >P H ,/
> T 1 j,A ' ,/ EUAC T 1 y 1, # k / 5 EUAC
k 1 S

Replacement Analysis
Retirement
Defender
Replacement
Challenger
 :J : k J1 ,H >e Q ' ,1 ). $ , ,/ # / : J % h- .
L0 /F" , + 1 Q " 1 k.S-,P ! T - 7777 ' 0 1 ./ 1C " ,* T # T
M 1 Q " 1-. $ J$ , 0 #- Q ! ' e - b , /3" ' > - A+
s P :J 0 1 ,e # w 5 ) J1 •67 # 1 B T
v. +w _P $ / 1' ,/ ,e b 31 k J $
/ :J ' e - b , /3" ' > - A + L0

T < R3 &7 " #C

2&Q 7* M- "@L ! !
(SV) " &( 0 [
7 7777 l
( 6 7777 l
2 ; I 777 6777
@ I I7777 ;777
4 ; 777 I777
67 ;7777 777
66 ( ;7777 777
6; 2 ;7777 (777
6I @ ;7777 2777
6 4 ;7777 @777
6 67 ;7777 4777
6( 66 ;7777 67777

7k777 ZA/A ,•67 ,6Y X 7k777 ZF/A ,•67 ,6Y

k777l 7k777ˆ6 k777
6777ZA/G ,•67 ,;Yˆ @7
 k. , 0 j,91 EUAC # 1# b 5 )

7& " &( "( " #C " &( -

MR L0 3@ 0 [
(n)# (A/P,67•,n) 777 (A/G, 67•,n)6777 EUAC
–SVt(A/F,67•,n)
7 l l l
6 6 777 l 6 777
; 6;6 7 @7 6;(;7
I 667 7 4 7 664@7
67I47 6I@7 66227
4467 6@67 662;7
( @@47 ;;;7 66667
2 @6(7 ;(;7 672@7
@ 2(;7 I777 67(;7
4 2;67 II27 67 @7
67 (@@7 I2;7 67(77
66 ((;7 7(7 67(@7

-8 # " / :J : 0 $ ! > C 9 b aA :
:J M 1 Q " 1-. # 4:J : $ / 1' ,/ 3 k 1 8 >P ‚ƒ
k # 6 1 C< . S ,/ ). $ , ,/ #

_P >e Q L0

EDRV= _P ‘ 3" L0 = EUACD - EUACC

EDRV>7 EUACD>EUACC . ' ‘ 3"
 A + L0 - ! T - 4 77 " E/ > ' . $, # I J h- .
' $ J F U k J1 . # 20 81 S ,/ C ! T - I 77
" E/ > -$ 1 ! T - I777 A + L0 - # 6 ,/ - ! T - ;@777 !- >
' ! L0 T ) J 1 •6 $ \Q N, T ,G k. ! T- 77 C< !
v. +w ,S Q$e - .P, \ $ , # I : J ' ,1 C "
EUACD = P(A/P, •6 , 2) – I 77 (A/F, •6 , 2) + 4 77 = 7†; 7I( P + 4†6@
ˆ4k6@
EUACC = ;@777(A/P,•6 ,6 )l I777(A/F,•6 ,6 )+ 77 = 67†I ; ˆ67kI ;

7†; 7I( P + 4k6@ – 67kI ; =7

P= †6@

mm
& / C&( N
, ~" 1 $ J K ] ' 1 0 1 ',e 0 1 0 .&" j,A % . &T > ! < •
kj,A !- ' ,
• j,A !- ' , b , ~" , Vz" C > ,1 1 ,G E5" ). &T > ! < •
k0 , )j,A
S j,A K ] . Q \G , 1 ', 9 1 C /A - J 1 , / b ,V : +w, •
k
'- • - K ] j,A ' , %" %" ' ,1 C " . &T > ! < •
k C9 J1 , 0 ," J " ' /
, ~" 1 ! <,P % b 5 ,M" Œ 0 .&" . &T > ! < BaS O1 •
kŒ !- b aA 0 $ < . 1 • & + - EB ' ,
J G / ] • ', e/9w , ~" , % Mw , ~" ,G •
k J1 &T , % , C< - . &T , C< 1 . & j,A

8 •67 * +" tO ,G k J 1 ! T - I77777 ‚ -, % i E3P L0 h- .

|1 O j,A E3P L0 1 1 8 >P •67 • E , > ,G : u/ ) J 1 J 8 >P •67
k / , ~" , 0 #- Q

Sensivity Analysis
 k. $ J . V , 0 #- Q - 5 DE F ' ! T ' ,1 E3P L0

; < se
H $ " #C
t+? I# C HX *aT t+? I !
PW= ;7777 PW= I77777 PW= ; 7777 EB b aA
PW= 7777 PW= I67777 PW= ; 777 • 8 >P
PW= ( 777 PW= I; 777 PW= ;( 7777 •67 8 >P

k ' 0 . &T E , > 1 . & PW

k. &T &1 * +" , ~" 1 . & PW

m_
' @ G
< $0 † j,A ,/ b F 5B )y + 0 ' /] "- " 1 5
k C9 ) J1 , B E3P d! S L0 ' ) !

1Y
F
W X

U %
> !V
W X
=

F
U %
W X -#

Z#-
%
W X ?
Isoquant Curve
-, 5 : : y+ /] - j,A L, \ T "- " 1 5 '[ 1 y + /]
k C9 j,A C 1
 -.
k. . , 0 b F9 1 T ,A
P= 627k777 !- > MARR= •6I
= I777 ! > N= 67 #
SV= ;7k777 y + L0
= I k777 ! <

k / 5 j,A d! S E3P L0 lD!

dF9 j,A # - T ! < - > ' , 1 "- " 1 5 1l
k /
k / ,1 < - > 1.& j,A . &T l^

ZD!
NEUAˆ627k777ZA/P ,•6I ,67YlIk777 … ;7k777ZA/F ,•6I ,67Y…I 777ˆ4 I7
Z
NEUAˆ627k777ZA/P ,•6I ,67YlIk777Z6…YY … ;7k777ZA/F ,•6I ,67Y …I 777Z6…XY
ˆ4 I7
NEUA= 62 2+I 77X-I77Y
' $f-, NEUA>7
"- " 1 =S NEUA=7
' , { $f-, NEUA<7

k / Z "- " 1 =S 3 Y NEUA=7 =S 1

I 777X- I777Y+ 62 2= 7
X= 7 Y= 62 2/ I777= 7† @
Y= 7 X= 62 2/ I 777= 7†7
 Y
![
&?

(O, NEUA>(
\\\\\ U %
(O+ W X 06
NEUA<(
-# \\ U % (O*
W X
(O)
(O'

X
-(O, -(O+ -(O* -(O) - & Z#-
(O'

\\\ ]\\\
F

NEUA=
(

k. &T &1 Z < Y X b , ~" 1 . & j,A

k J1 : . &T ' Y b , ~" 1 . & j,A
 mq
2&7Z
C—0 — < $0 - + J1 Q , 1 UE{ ' ' E5"
Œ —B S )$ — < —1 y — " _—O —O1 C —" / $ eu C w k J b 5 -$ <
,——H —— ,+" ——O1 —— , , ——+ \——! k ,——H .—— [ ——A $f-,—— $ - ——M 0
: —/F" —1 —] $ — < —, :— 0 —S,1 —1 y — " — $ —/ " 31 - , G
k.P,G ,H C " .! T : /F" ' ,1 k J 1
%— 0 — " ,—G - —J 1 — ! — — <,P : ," " / T h (M) (4= / 5 : /F" l6
k 1 S :/ J$ : /F"
k. $ < = ,J , ~" ,1 J S 1 0 h (O) 27 J S : /F" l;
k Š ,V ! $ <,P ,1 $ <0 1 1 1 0 0b h (P) 26 1 1 : /F" lI

_4 _1
2&7Z u # 2&[ &
2
k J D ,3" , 0 j,91 : /F" ‚ --:e Œ 1 ' < _ 0 "Œ ,1

R1_ R`% O^+M+P

= 7
)
a% !#. O-P
R1_= 7

—+ s —P —O1 |— A k J 1 /F" % 1 0 0 ," [

o /3 /F" ,M -
k C0- : , 9 1 = : /F"

h# „
$f-,— C 1 ' ) B 6 $ \Q N, T - P, O, M : /F" 1 Q "1
k / ,1

Estimate
Most likely
Optimistic
Pessimistic
Mean
Variance
Beta Distribution
 P M O
67 ;7 67777 67777 "&( " #C
6477 64@7 ;777 " &( N
4 6; 6; &' 7*
l l 6777 T < R3

O) 67777= ;777 (P/A, i%, 6;) + 6777(P/F, i%, 6;) RORO = 62•

M) 67777= 64@7 (P/A, i%, 6;) RORM= 6(k2•

P) 67 ;7= 6477 (P/A, i%, 4) RORP= 66•

.—9G0 1 N,— — 5 1 0 \! . , / MARR 0 1 1 , .9G0 1 N, C w

k J1 : /F" : e ,1 ,

!- > = T = (67777… (67777)+ 67 ;7) / ( = 677@(

! < = T = (;777… (64@7)+ 6477) / ( = 6427
A + L0 = T = (6777… (7)+ 7) / ( = 6((k2
,/ = T = (6;… (6;)+ 4) / ( = 66k

677@(= 6427(P/A, i , 66k ) + 6((k2(P/F, i%, 66k ) ROR= 6(•

k J1 ' j,A

_6
"@ C&( N
—+ ,9 , ' j,A : - J 1 ,1 . j,A w - $ G,
3O , { , : k J1 J Q- ' 0 o & $ - 5 % , ~" # / T - $ 3O <

Point to point
——— , :——— ,——— ~" $, ———&G - ——— j,———A ——— ,1 ———1 - $ ———/ C ——— 1 ,——— ~ _1 ———" b ——— 1
$ . —& , — : 1 ' + 1 Q " 1k G , 1, >! < ,1 : k 0 ,
— ,— ~ 0 ' —+ k J 1 ," ' kkkk - K- )#- j,A DE F ' $ - 5 ) J
,— —1 , O+ 91 '- & ' L0 % ' ,1 ' j,A " J UQ
k G

h# „
h J1 ,H ,0:J - ,S
h6j,A % " " : J
;I7k777 ˆ !- >
7k777 ˆ A + L0
# 67 ˆ: J ,/
. ! T - 6;7 ˆ " , >
, 6ˆ ", 3"
! T - I k777 ˆ ! " E/ >
. :" @ ˆ ! " C >

h; j,A :J
@7k777 ˆ !- >
ˆ A + L0
# ˆ: J ,/
. ! T - @7 ˆ " , >
, Iˆ ", 3"
! T - 6 k777 ˆ ! " E/ >
. :" ( ˆ ! " C >

—" —J 1 —+ —w # ! "C> ) /' E5" , 1, > ! < L- 1 j,A - :

:J K ,S J 1 # :" ;777 ! " ,1 ,G ) J 1 P,B 1 C-,+ % " " : J ,S
k. ," '
 h T
U. ' 5Y c ')(
K & KX & E cQ E xQ',X
' W X . c 5Y % -[1G - ![ Q ')( &

, 1, O+ # &M :" U&T,1 ! " + ˆX

EUACO ˆ;I7k777 ZA/P ,•67 ,67Y l 7k7777ZF/A ,•67 ,67Y…I 777…6 X

'
ˆ (4†4;7…6 X 7
; j,A ' ,1 :" , ! >/ > ˆ @7“I “ “Xˆ 7X

EUACD ˆ@7k777 ZA/P ,•67 , Y … 6 77… X

ˆ I(†677… 7X
EUACO ˆ EUACD (4†4;7 … 6 x ˆ I(†677 … 7X xˆ 6I ;†@
# †:"
\! . ," ' %" " :J ,S J 1 # :" 6I ;†@ + 0 8 1 ! " C > ,G
k J' ,S % " " : J J B " J1 J ! "# :" ;777 J 1 , ,G

![
I\ ![
I ?
' W X

I\ ![
) W X

\\\\\ ![
W \X 5 b

\\\\\ ![
W \X 5 b

X -. \\\\\:
U.
 _m
c
k G K " C 0 .J\G 1 Z ,S b , ~"Y b S - [ ' 1 , ~" "
# C< K " N, R F1 # % b S [ % ./ , ~" N, "
k G
# K "
C = " M 3O M % 1 L0 d F" "
k 1 $, 1 N, / dF9 0 _O+ - ‡E - : 1 . & u < C " "

c B N @ )H*
22
> 8 >P 0 J K " •
3 A , S‹ E+" •
3 A ' a1 - t •
2@
./ 8 >P 0 J K " •
# 0 L0 •

Inflation
Price Inflation
Cost Inflation
 24
c b " G
,— 0 O1 1 K " N, ) J 1 P; 31 # - P6 # % A '[ = ./ ,G
k J D ,3"

if = ((p; – P6) / P6 ) 677

if = Z B Y [ K " N,

h ,G
P(t) = t C 0 [ ./ =
P(t+ t)= t C 0 .J\G 0 ‚ [ ./ =
h1 J ,1 ,1 tb K "= N,
P(t+ t)= P(t)(6…if)

k /3" C " s P O1 J 1 .1 V K " ,G

P(t+n t)= P(t)(6…if)n
t 0# A 1 $- 3" ˆ n

K# K " N,
k J1 K# K " N, ifk ,G
K# ' ./ = K k # ' 1 ./ “ (6…ifk)
6… ifk = ( K . # ' ./ ) / (K . # ' 1 ./ )
ifk = ( K . # ' ./ ) / (K . # ' 1 ./ ) l6

K n# ./

Inflation Rate
#— ./ - kkk - ifI - if; U "," 1 31 ' ! - J 1 if6 # K " N, ,G
h 1 . ,1 ,1 K n # ./ J 1 P6
Pn= P6(6…if6) (6…if;) (6…ifI) …. (6…ifn)

k ) J 1 P(t) ./ 1 [ % 0 T - V ,S > Y(t) ,G

V= (Y(t)) / (P(t))
k /3" O1 : C " DE F 0 _A + -

V= (Y(t6)) / (P(t6)) = (Y(t;)) / (P(t;)) = (Y(tI)) / (P(tI))

q?
K
Z' Q [ Y k J 1 0 _O+ , .S , .P ‡E T-0 b

q+
@ D R3 @ K
— # # T - ,S b U&T,1 $ < # T - ,S b 0b
ZK " C- 1 [ l0-, [ l, B C 0 [ Y k J 1

k ) J 1 .1 V [ ' + C ,Q Y'(t) - k J 1 & + C 0 • # t7 ,G

Y'(t)= (Y(t)) . (P(t7)) / P(t)

P(t7) / P(t) = 6 / (6…if)n = Z.1 VY Dc / Z' QY Da , n= t - t7 / t

D(t) = P(t7) / P(t) = Dc / Da $ 3" U ,*

k ,G , $ ,e L0 1 [ 1 L0 % 1 [ " ' ,1 U ,* :

D(t)= 6 / (6…if)n = P(t7) / P(t) = Rc /Ra

Actual Dollar
Constant Dollar
 k J 1 .1 V K " N, ,G
Y'(t)= D(t) Y(t)

q1
7& UV Q
[ — % ./ . & ,rEB T 0 J C 1 % = "[
o /3 ./ dS J
——B T 677 —— D——E F —— 0 _——O+ - b ——S - —— [ 0 —— -,G —— ‚ -,—— ——
k G # ," -0 0 _O+ k J
# 6;777 L + 6I@; # -# I777 ) 6I2 # • ,1 K,G E % ./ ,G h# „
h 1 . ,1 ,1 6I2 # ' ,1 ./ dS J k J 1
(6;777 / I777 ) 677 = 77
k 1 S 677 ,1 ,1 # ' ,1 dS J : ,1 1

k J D ,3" , 0 j,J 1 b S - [ 0 $-,G M ' ,1 6n dS J

In = ((Pn6 / PK6) + (Pn; / PK;) + …. + (Pnm / PKm)) / M

# ˆK
,1 # ˆn
,1 ,B 3" ˆ M
n# m? 0 [ T - % ./ ˆ Pnm
(K) # m? 0 [ T - % ./ ˆ PKm

— w — [ % . / ,G k. $ J P,G ,H '- & E C0- s P O1

k J jaB , 0 b 1 s P O1 J 1 +1 0 , 9 1 [

In = ((Pn6W6 / PK6) + (Pn;W; / PK;) + …. + (PnmWm / PKm)) / (W6+ W; +

… + Wm)

Ka 0 % , 0- U ,* ˆ Wi

Price Index
 UV Q
q4
WPI Q : 7* 7& UV Q ,+
b —S - — [ • >—1 $-,—G $ > — .—/ > ! — < — ,1 —J-,P $ / ./ dS J
- — ,w b[ — 5 l Q & b[ 5 l$ J ‚ -, \{ l' > b[ 5 ) E/]
- b >—EP l &1 - b[ 5 - \{ l wl M [ l /J l S lC< , H
— —+ - /T - l'>EP , { b[ 5 l#> K0 ! - C /E lb[ : J l'>EP b[ 5
k J1

q5
CPI : ! 7& UV Q
— U— "," : —1 k J 1 = < ' ' $ S' > ) 3 L- :
- —J — — 5 - ',— G $0 — $ - ,— S : = " P, ' [ ./ : e
:— j,—O ' — -,G k ,—G — ^ ,F — K —" N, - & + E ' $ - 1 C< + ‚ƒ
k J1 WPI J-,P $ / ./ dS J 0 ," E dS J

q6
IPI kHe 7& UV Q
b S- [ / ' 0 1 L0 ? /] " 31 E d! S ! " 3 L- :
k J 5 E d! S ! " ' ,1 K " - ./ b , ~" L- : k J1 3 Q tO

UV Q k# T 3 c b " G
If(t…6)= ((CPI(t…6) – CPI(t)) / CPI(t)) 677

- $ # V
k. dS J C / ',1 $- 5 ./ dS J ‚M # ,S b
k. +w # 1.& ,S b k J 1 ;2;k; ,1 ,1 CPI + 6I( # ,G h# „
,S b = (6†;2;k ) 677 = 7kI2(

Wholesale Price Index

Consumer Price Index
Implicit Price Index
$ — ,— .—/ dS —J — ,1Y 64@@ - 64 7 ' ! — : 1 [ ,S b , 0 #- Q
Z CPI

- CPI - CPI - CPI

64 7 ;kI@6™ 64(7 6k6;2™ 642 7k(2@™
64 6k@ ™ 64(6 6k66(™ 642 7k(;6™
64 @ 6kI@2™ 64(; 6k67 ™ 642( 7k @2™
64 4 6k 76™ 64(I 6k746™ 6422 7k 6™
64 7 6kI@2™ 64( 6k72(™ 642@ 7k 6;™
64 6 6k;@ ™ 64( 6k7@ ™ 6424 7k (6™
64 ; 6k;@ ™ 64(( 6k7;4™ 64@7 7k 7 ™
64 I 6k; @™ 64(2 6k777™ 64@6 7k (2™
64 6k; ;™ 64(@ 7k4(7™ 64@; 7kI (™
64 6k; 2™ 64(4 7k466™ 64@I 7kII ™
64 ( 6k;;4™ 6427 7k@(7™ 64@ 7kI;6™
64 2 6k6@(™ 6426 7k@; ™ 64@ 7.I67™
64 @ 6k6 ™ 642; 7k244™ 64@( 7kI7 ™
64 4 6k6 ™ 642I 7k2 ;™ 64@2 7k;46™
64@@ 7k;2@™

/ ' \G , •6 01 1 # ;77k777 ‡E S FJ },P h' #„

—] . Q : 0 _1, , 6 7 + BT - , _/Q 1 ] # ' -
—31, ,— ,— ,— 0 ,—H — —5 : 0 ./ ,* T # T k ' ,S M& T -
dF—J :— ) J 1 •6@ $ < # = O1 : 0 ./ 8 >P N, ,G k. # 6(k777
k — : — 0 — ,S ' ,—1 —+w ,—* T # T v.J S EM9 w ] # C
k.J S +w ] # C

6(k777(6 7)= ;k 77k777

;k 77k777- ;k777k777= 77k777 ,* T # T ',&
F= P(F/P, 6 %, ) 31 # ,
F= ;k777k777(f/p, 6 %, )= ;k777k777(6+k†6 ) = Ik@ 7k@;4 #

—1 — —/ .—S , # — 6 7Z6(k777Y ˆ;k 777 1 : 0 , 6 7 ,S ' ,1 ,* T # T

h J : w C< # 3 $ < ‡E ) •6@K " N, : P,G ,H
F= ;k 77k777 (F/P, •6@, ) = k 46k;77 31 # : 0 ./
;k 77k777(6+if =7†6@) = k 46k;77 #
k 46k;77- Ik@ 7k@;4= 6k( 7kI26 # 0 31 ',&

',—& —1 # ' 1 M" B ) ',& # 6k( 7kI26 ‡E dFJ : 3

k. Q # 77k777 ‡E
— < — 5 — ) & 19 K ,H 0 # ,S b 8 - ./ 8 >P w,
,—G C —w ).—& C —&M # — ,S b 8 •6 1 ./ 8 >P •6 a
o „ k. DE F
h,1 ,1 # ,S b 8 B ) (if= 6 •) ) 1 8 >P •6 C > 1 ./
6- (6/ 6k6 )= 7k6I k 1 S ./ 8 >P •6 ' 0 ,S b 8
—i - — 5 CPI K — — ,1 - —B U—&T,1 [ b — — 5 B #- Q
'- —& 64(2 # — ' — ,—1 [ — ,S b — 64@I # 1 / ' ,1 k. $ ,G
— 1 — # — :— b —S [ ? C / ,S ' ,1 .& C< K J1 7kII
k / .S , # ,1 ,1 3 6†7kII = ;k44
h' #„
k / : 3" 64(2 # [ 1 64@7 # ' Q [ : 1 O1
h T
64@7 # .1 V [ = (677†; (k@) (6 ) = (6†;k (@) (6™) = 7k 7 ™

# —— 6I b —— K ——" ' —— S, —— =—— if C< —— ;k (@= (6…if)6I # ——„ :——

h 3 ) Q- " N, # , ' ,1 . 3 - k (64@7- 64(2) J 1

(6…if(@)(6…if(4) … (6…if24)(6…if@7)= (6…if)6I

h' #„
 — $ —/ .—P # 6 77777 ‡E 1 -' & W 0 ? 0, % },P
- .—1 V K —" N,— ,—G k.— $ J P,G ,H @• K - $, 1 k / .S , 0 1 # 67 b
.— 1 .—1 V # — U—&T,1 C< .—S , 0 1 - K - $ —Q- C — ,Q —S ) J 1 • ! K /"
k -<
h T
A= 6 77777(A/P, @•, 67) = 6;7777
.—1 V # — # —3 . # 6;7777 '- & @• N, ,1 K - [ .S , =&
k < . 1 , 0 O1 0 K # , C<

6;7777/(6…7k7 )k = 6;7777(6k7 )-k .1 V #

h ) ] # ' ,1 a
o„
l
6;7777(6…7k7 ) = 6;7777(7k2@I )= 447;7 # .1 V #

‚M3 — —31 5 —B #- —Q • — — — — K] 19 5 y& , ' ,1

— — ‚T ' & W )$ Q- C ,Q # 3 .1 V # 5 0‚ C k. $ ,G
‡—E $ — < # — 67 a
o „— k — — .—P a
o —/ 0-,— # — U—&T,1 P w o + +T
— ,S b — — " — — .—P K- —&T &" .1 1 ,S< # ' # 6(;7777
— # 7k(6I4 L0 # , $ < # 67 ,e b 31 k E3P C 0 # 44 6@
k. C G , G K - _ 1- M 1-' b & W ,* 1 K " Ex& . Q : 1 k.
tO— — ' ' ,1 k. K E3 C /A 1 ' Q # U&T,1 $ Q- C ,Q # „ :
" % a
o „ k ] .1 V # U&T,1 > . ," $ ) /1 .1 V C 0 # A . ! 3P
) ——J —— P,G ——M1 D——E F ' ! —— '- ——& b —— ——3" ' ,——1 .—— ,—— s,——1 —— ! "
[ — ' — — > \! ) J , # :{- - .S 3 + / },P C "
k / , ~" .1 V # U&T,1
.1 V # 1 $ Q- C ,Q 1 ' Q # 1 $ Q- C ,Q " , 0 #- Q
-# L: B# )# h# ; -# L: B# (
M @D M0
66 ;@@ (6k7 )l6= 7k4 ; 6;7777 6
67@@ 7 (6k7 )l;= 7k4727 6;7777 ;
67I( ( (6k7 )lI= 7k@(I@ 6;7777 I
 4@2; (6k7 )l = 7k@;;2 6;7777
4 7;7 (6k7 )l = 7k2@I 6;7777
@4 (6k7 )l(= 7k2 (; 6;7777 (
@ ;@ (6k7 )l2= 7k2672 6;7777 2
@6;6( (6k7 )l@= 7k(2(@ 6;7777 @
22I ; (6k7 )l4= 7k( ( 6;7777 4
44 6@ (6k7 )l67= 7k(6I4 6(;7777 67

:j $ : 0 # c &Dv
,—— ——1 = ",—— —— > —— —— < ' —— ,1 —— .—— :——J- ).——J\G C ——" ——u < ——1
# — !- ) J 1 ' Q# + ,1 ) J $ 0 : /F" -<,1 ' \G ,
—H .— Q k —J — $ ] — .1 V # U&T,1 C 0 _O+ , . ~E 0 - ,VW
.———! S Ex———& —— — — E F ' —— S, : ——1 > ——/" ——" .——— ' -,———* K ——" , Vz———" C ——/
k J $ t * " , 0 j,J 1 N, ? y " : k ,G :J- /
C< —1 _— —r31 — .—P,G , $ J\G # P . $, 1 N, C /
@(
b — 0) — — — ' 01 `, 0 C \G , k G > 0 1 $, 1 N,
— ,—H — a
o —/ — ' $,— 1 \! ) G< K " b ,r 0 : u/ - _P U& ' ,1 #
N,— ) —1 — 8 >—P K —" N, 3 k J1 # ,S b -# b J
k 1 8 >P > i $, 1
i' >q_: @ b
, —H - M —1 ba —3 — .& S, i' N, k. $ J \T K " , Vz" N, :
—J 1 —J —Q- K —" ' = ,J % ,G k J 5 1 ] - J 1 • C<
k G > .1 V # $, 1 N, ) 3 - $, 1 N, : k. i=i'
0$ — 1 - K " N, : J . 1) ,G D ,3" b5 B N, : (if) c b
k‚M ,1 - / "' Q# 1 ).1 V # C 0 ! ,1 , C " kkk O1
# — P —M O / ) —J 1 ' —Q # — U&T,1 > - < $ Q- C ,Q ' ,1
kZ,— 0 D—! M—JY —J — K ] i $, 1 N, 1 C 0 5 '- ‡E , ~" ,G t ,9" J\G
kZ, 0 MJY / $ i' $, 1 N, 0 ) .1 V F1 M " B

Market Interest Rate

Inflation- Free Rate
 F

\\\!#
:6.
('^i)n

'/ ('^i)n

' ) n-' n

FC
'/ ('^if)n

('^if)n

!#
5 b
('^i')n

'/ ('^i')n

' ) n-' n

if ) i' ) i : 1 O1
C —&M — ,S b ' - , .1 V # -' Q# Z,* T # TY , B C 0 _O+
# — - ' —Q # — C —1 '- —& —1 Q " 1 k Q- ',1 1 ,e 0 _O+ š ) &
- $ —/ — 5 kkk M—J - - D—! ./—& C — 0 # —3 )Z, B # Y _O+ .1 V
k , , B '- &
k < . 1 kkk O1 0 & K n# ' - , fC - f "

-.
0 — ,—* T # —T # — ;7777777 ' \—G ,— 1 $f-, % d! S <
) J 1 .1 V $f-, # @ b ' ,1 - i= 6 • $, 1 N, ,G k. , 0 / |1 O
 k / 5 ' Q# U&T,1 $f-, : # T C 0 # 3 lD!
:— $ —Q- C — ,Q —/ —J 1 2• —31 # — - (• #- # K "= N, ,G l
k -< . 1 .1 V # U&T,1 $f-,

+,(( +,((

' ) * + , 7 8 E

)(O(( i=M', S U L 6#.

( !# #.[

P = A(P/A, 6 •, @)

P= 77(P/A, 6 •, @)

' !— ' .1 V # U&T,1 # 3 K ] -. (• K " .&F # ' ,1 h)

k < . 1 , 0 j,J 1 K " #-

aC6= 77 / (6… 7k7()6 = ; k;@I # >

aC;= 77 / (6… 7k7(); = 77 k4@ # >
aCI= 77 / (6… 7k7()I = I22@k;@2 # >

' ,—1 (• K —" N,— , V —" .5" 9 " K w ' ! ' 0 d! S < ' ,1
h \! k , b +1 ' ,1 2• K " N, - $f-, #- #

aC = 77 / (6… 7k7()I (6…7k72)6 = I I6k674 # >

aC = 77 / (6… 7k7()I (6…7k72); = II77k67; # >
 aC(= 77 / (6… 7k7()I (6…7k72)I = I7@ k;72 # >
aC2= 77 / (6… 7k7()I (6…7k72) = ;@@;k I2 # >
aC@= 77 / (6… 7k7()I (6…7k72) = ;(4Ik@(( # >

' —Q # — - .— .—1 V # — — + ' ,1 ' \G , # ;7777 ‡E . 1

k J S , 0 MJ |1 O .1 V # 1 " 0 ‚ $f-, $ Q- C ,Q k 1 S C &M

*,*'O'( *(E+O)( )79*OE7

+((+O9E 8
+
+)+,O)E *88EO)E **((O'( 7
)EE)O+*
* 8 ) 8

' ) * + , 7 8 E

S U L 6#.
)(((( !# #.[

(f) c b
k C 9 f 1 , < - ./ 8 >P N, 0 .&" K " N,
k / 5 K " N, k J 1 ;6( 31 # - ;77 # [ dS J h- .

(b − a )
f =
a
# dS J a
31 # dS J b

(216 − 200)
f = = 0.08
200
 k / 5 K " N, k. $ ;6( 1 62( 0 # I ,g SJ -.

216
176(1 + f ) 3 = 216 → 1 + f = 3
176
f = 71% → f = 7.1%

M0 0 :j $ c D @L c C&( N

-' b 5 ,< [
o /3 Z B 0 ,/ a
o „Y J1 K " N, ,G
k ,G $ ' E5" ' ,1 ! 0b ,{ k / /

h0 " H : ' ,1 EB # -
3- ! <,P 1 K ! <,P " 1 K " b ,V \T l6
$ JK ! ' <,P 1 $f-, E5" - >]" l;

if 0 wb " G
kK " C / c 5E 0 31 $ \Q N, T 0 .&" if ', g N,
k J1# tb 1 K " 0 31 L0 Ft - ,* T # T L0 P ,G

P= Ft / (6…f)t (6…i)t
P= Ft / (6…if)t (6…i)t (6…f)t = (6…if)t
if = i + f + if

k / 5 ', g N, J 1 • K " N, - •67 $ \Q N, T ,G h# „

If = •67 + • + 7†7 7 = •6 †7

)# @ D h# ;
—F1 - —J 1 J b- # - ' ,1 $ , ./ ' SJ + $ G,
j,—91 — " .—1 V U ,—* 0 / " ,e # ./ 1 K " 1 Q " 1 # &M ./
k J $ ,0
 1 + (214.1 − 195.4)
CPI = = 1.098
195.4

Z6I2( # Y K ./ = I22777 “ 6†74@ = I@4777

c 0 &Y :3
[— — > ) — .—/ dS J k , ', G $0 ./ dS J %/ 1C " K "C>
h 3 k C9 # [ C/ > 1.& [ % ' Q

R: d 0 ;! ![
e @ Q d# T #- '(
51 6 0 B ![ K(
! #-
(Types of Inflation) c
(Demand-Pull Inflation) * +" 89 0 J K " k6
(Cost Push Inflation) > 9P 0 J K " k;

; < IJ! 3 Q c
, 9 1 ,S 1 ,] ' V T , k ,1 [1 ./ / tO * +" 8 >P
K "p 1) J E ' ,S 0 8 1 b S- [ 0 b& - !- )C G ,
k J * +" 89 0 J
" #C J 3 Q c
0 J K "Π). [ $ J K /" ./ 8 >P ] ./ tO : P [ 1
k Π> 9P
k. $ 1 B ; 77 ' ! 1 ) B @77 i, [ K " N, 64@ # 1
M , < . % ,1 ,1 ` C E ," ; , ' 1 J L0 C u < C /!< # 64;I ,
k J
(Effects of Inflation) c D
0 , 3 , Z >/ N, Y < ,G k 8 K, G 0 tO ) ./ 8 >P
./ 8 >P 0 ," < 8 >P ,G - - [1> G 0 tO ) J $ ->P ./
k < : G 0 tO ) J 1
k J 3 Q% 'r C < ] _ 0 " 1 ,] " K " k6
k J' i 8 1 ,] " K " k;
 k J#~J , ~" - ! " , ~" UQ " K " kI
(Inefficiency) x !c *
1 / - L0 1 _1 0 r31 J UQ ? * : ` K
,G ' . ! 3P 1 ,] K " k i< ) / Q ,H 0 J O3 i . ! 3P
18 01.& 0 ,91 K " i < k. $ P 1 3 Q ' ,1 . J
', V< ,S - aA ) Q S # ) + +T i '- '0 1 Q S La"
' ! " , { 1 ' ! " ' 8F1 0 ! _1 ,5 UQ K " E O1 k +
k 8 ' . P,g - J
(Stagflation) 0 ! c
= ,J E/Q 0 k J 1 K " 1 $ ,/ )[ 1 ' M 1 N, '- 0 K "? :
8 >P & -,1- $0 " ' $ 1 ,* T C, k. ./ 8 -' M1) 3 Q
) Œ' K "Œ & 1 C, K- / $ : k # 1> ' M 1 ) ./ tO
k S t * " C< o 31
(Economic growth) 0 Q
' 9 $ J ! "b S - [ ,G k. 9 % ! " 1 &1 - )' J
$ J ! "b S-[ : [
o / T k. $ , J L G ) J1 # 0 81
k ,1 S[1 G 0 tO
(Business Cycles) y f
' ]" + +T . ! 3P tO ) 9 l 9 >P ' . ,T ' e! )' ]" Z M Y - %
k.
46 47
|- l 1 lI @4C ,51 l; @@' & k6
' &
! " N, 8 •
' M 1 8 >P •
C ,51
! " T•
' M 1 ,„ T•

Recession
Slump
Expansion
Boom
 1
! " N, 8 >P •
' M18 •
|-
! " ,„ T•
' M1 T•
k. # o ,+" ' ]" - %

Gross National product (GNP) H U( V &(

- S E ! " E - 1' ! " i b S - [ L0 ? /] ) E !S ! "
[ J) E !S ! " )D ,3" : 1 Q " 1 k. : 3 $ - % 9 0 ^ S
,H " S - kkkk S ,H ! - )kkk EM! , { b 1-,9 ) i \{ ) S>ƒJ< K0 ! , H
5 L0 1 )[ 1 0 % , ! " + k J kkkk )',e9 < ) E3" )b- r
. 3/Q ,1 E d! S ! " ,G k < . 1 E d! S ! " C 9 /] 0 - J
k J BT , E d! S ! ") &+" 9
Gross Domestic Product (GDP) HV U( V &(
- Z. E 0 ,H P,BY 9 % S $ J ! "b S - [ L0 ) ES d! S ! "
k J .P ^ S 0 E d! S ! "0 /& k. Z# % Y : 3 " ' ,1
M9" C, E d! S ! "0 9F1 . , ,G % h# „ ' ,1
k. $ . 1C, S < : , 0 k.& ES d! S ! " ->Q k
&5 C , (GDP) ES d! S ! " ->Q )C , + ' < A :/
k < / &T 1 C , E d! S ! " ->Q k J
E d! S ! " ˆ ES d! S ! "…^ S0 ! " ' .P d! S
GNP=GDP+NA
 /&H[ n

6. G. J. Thuesen, W. J. Fabrychy, Engineering Economy, (Prentice-Hall

international Series in Industrial and Systems Engineering), Prentice-
Hall College Div; ISBN: 76I7;@6;X; 4 edition, ;777.

;. James L. Riggs, David D. Bedworch, Sabah U. Randhawa,

Engineering Economic, McGraw-Hill, Higher Education, ISBN;
th
77246;; @ , edition, 644(.

I. Gerald W. Smit, Engineering Economy: Analysis of Capital

th
Expenditures, Iowa state university press, ISBN: 7@6I@7 I@;

edition, 64@2.

. Eugene Lodewick Grant, William B. Areson, William G. Ireson,

Principle of Engineering Economy, @th edition, John Wiley & Sons;

ISBN: 7 26(I ;(X; 6447.

. Leland T. Blank, Anothony J. Tarquin, Engineering Economy,

McGraw-Hill, Series in Industrial Engineering and Management
th
science, McGraw-Hill Collage Div; ISBN; 772; I;I 4, edition,

;776.

(. J. C. Sprague, J. D. Whittaker, Economic Analysis for Engineers and

Managers, Prentice-Hall, ISBN; 76I;; 7( , 64@ .