Notes for Assessment 6 TWOM Contract Planning and Earthworks 2012

These formulae below are the items usually used in the financial analysis of Projects
A short description, on the application of each formulae, is provided below each one
For this coarse we will only be using the "Capital Recovery" formula (No. 6)
I however will discuss Compound amount, Single amount, (No. 1) at first, this is to assist with the principles Page 1/2

1 2 3 4 5 6
S= P*(1+i)^n P= S*1 S= R*(1+i)^n - 1 R= S*i P= R*(1+i)^n - 1 S= P*i*(1+i)^n
(1+i)^n i (1+i)^n - 1 i*(1+i)^n (1+i)^n - 1
Compound amount Present Worth Compound Amount Sinking Fund Present Worth Capital Recovery
Single amount Single amount
Invest the following: You will inherit : You need to pay penalties: You need to pay in future: You have a dividend pay-out: You need to pay off:
'- R150 000 single amount - R320 000 a single amount - R3 500 - each time - R53 000 a single amount - R650 - each time - yearly - R730 000 a single amount
'- For 1 year - In 20 years - In 30 years - In 5 years - In 15 years - In 5 years
At 6% per annum - At 4% per annum - At 4% per annum - At 6 % per annum - At 4% per annum - At 12% per annum
Monthly calculated - Calculated yearly - Calculated yearly - Calculated monthly - Calculated yearly - Calculated monthly

What is the future value What is the present What is the future value What is the payment What is the present What is the payment
value in total per period value in total per period

The values the students need to calculate, will be by applying 2 methods, are the following:

1)
You need to calculate:
What an investment of a single amout now will grow to in a specific period at a specific interrest rate:
The principles for the interest are:
All interest rates need to be publish as a % per year
Depending on the calculation frequency you need to adjust this
If it must be calculated yearly then is stays 6% in the formula however i= 0,06
If it must be calculated monthly then it is 6/12 %= 0,5 %, in the formula however you use i= 0,005
If it must be calculated weekly then it is 6/52 %= 0,115 %, in the formula however you use i= 0,0012
If it must be calculated weekly then it is 6/365 %= 0,016 %, in the formula however you use i= 0,0002

The principles for the interest are:

All periods need to be calculated to represent the total duration
 If it is for one 1 year and frequency is yearly then the period is 1
If it is for one 2 years and frequency is yearly then the period is 2
If it is for one 1 year and frequency is monthly then the period is 12
If it is for one 4 years and frequency is monthly then the period is 48
If it is for one 3 years and frequency is monthly then the period is 156

Let us look at the formula 1 now

Please note that the aspect (1+i) is predominent in all the formulae
Therefore let us first calculate the item (1+i)
In Formula 1 above the example is: '- R150 000 single amount
'- For 1 year
At 6% per annum
Monthly calculated
Therfore (1+i) = 1+ 6/12/100
Therfore (1+i) = 1+ 0,005 = 1,005

The fotmula is: S= P*(1+i)^n

Therfore P= 150000
(1+i)= 1,005
n= 12

The answer is S= R159 251,67

Let us look at the formula 6 now

Please note that the aspect (1+i) is predominent in all the formulae
Therefore let us first calculate the item (1+i)
In Formula 6 above the example is: - R730 000 a single amount 730000
- In 5 years 5
- At 12% per annum 12
- Calculated monthly
Therfore (1+i) = 1 + 12/12/100
Therfore (1+i) = 1 + 0,01 = 1,01

We also see that not only (1+i) is used ofter it is (1+i)^n that is used often
Therefore (1+i)^n
= 1,01 ^ 60
 = 1,816696699

The fotmula is: S= P*i*(1+i)^n

(1+i)^n - 1

Therfore P= 730000
(1+i)= 1,01
n= 60

The answer is S= 13261,89

0,816696699

S= R16 238,45