Minggu 3 - Chapter 04 Equivalence For Repeated Cash Flows

Note: These PowerPoints were developed to
support the US edition of the text. In some

cases, figure numbers, variables, and other
items may not correspond to the
international edition.
ENGINEERING
Newnan, Lavelle, and Eschenbach
ECONOMIC
ANALYSIS, 12/e Copyright © 2014 by Oxford University Press
Chapter 4
Equivalence for
Repeated Cash Flow
Copyright Oxford University Press 2014

Chapter Outline
• Uniform Series Compound Interest

Formulas
• Arithmetic Gradient
• Geometric Gradient
• Continuous Compounding
• Using Spreadsheets for Economic Analysis

Learning Objectives
• Solve problems using Uniform Series

Compound Interest Formulas
• Apply arithmetic and geometric gradients in
modeling economic analysis
• Understand nominal and effective interest rates
• Apply continuous compounding
• Use Spreadsheet to model and solve economic
analysis problems

Compound Interest Notation
• To facilitate equivalence computations, a series of

interest formulas will be derived. To simplify the
presentation, we’ll use the following notation :
i = Interest rate per interest period (%)
n = Number of interest periods
P = A present sum of money
F = A future sum of money
A = An end-of-period cash receipt or disbursement in a
uniform series
8/23/2021 5
Uniform Series
Notation:
A = an end-of-period cash flow in a uniform series,
continuing for 𝑛𝑛 periods
A A A A
0 1 2 n-1 n
Examples:
• Automobile loans, mortgage payments, insurance
premium, rents, and other periodic payments
• Estimated future costs and benefits

Uniform Series Formula (1)
According to the equation F=P(1+i)n, we’ll use this relationship in
uniform series derivation
A A A A A A A A
= + + +
F = A(1+i)3 + A(1+i)2 + A(1+i) + A
In the general case for n years,

F = A(1+i)n-1 + …. + A(1+i)3 + A(1+i)2 + A(1+i) + A
Multiplying equation above by (1+i),

(1+i)F = A(1+i)n + …. + A(1+i)4 + A(1+i)3 + A(1+i)2 + A(1+i)
8/23/2021 7
Uniform Series Formula (2)
Factoring out A from two equation above and subtracting them,

(1+i)F = A[(1+i)n + …. + (1+i)4 + (1+i)3 + (1+i)2 + (1+i)]
F = A[(1+i)n-1 + …. + (1+i)3 + (1+i)2 + (1+i) + 1]
iF = A[(1+i)n – 1]
 (1 + i ) − 1
n
Solving equation for F, F = A 

 i 
The term within the bracket
 (1 + i ) n − 1
 
 i 
is called uniform series compound amount factor and the
notation is (F/A,i,n)
F = A (F/A,i,n)
8/23/2021 8
Uniform Series
Uniform Series Compound Amount Factor
(1 + 𝑖𝑖)𝑛𝑛 −1
𝐹𝐹 = 𝐴𝐴 = 𝐴𝐴(𝐹𝐹 ⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛) (4-4)
𝑖𝑖
Uniform Series Sinking Fund Factor

𝑖𝑖
𝐴𝐴 = 𝐹𝐹 𝑛𝑛
= 𝐹𝐹(𝐴𝐴⁄𝐹𝐹, 𝑖𝑖, 𝑛𝑛) (4-5)
(1 + 𝑖𝑖) −1

Example 4-1 Uniform Series
$500 were deposited in a credit union (pays 5%
compounded annually) at the end of each year for 5
years, how much do you have after the 5th deposit?
F=?
0 1 2 3 4 5
500 500 500 500 500

(1 + 𝑖𝑖)𝑛𝑛 −1
𝐹𝐹 = 𝐴𝐴 = 𝐴𝐴(𝐹𝐹 ⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛)
𝑖𝑖
= $500(𝐹𝐹 ⁄𝐴𝐴, 5%, 5) = $500 5.526 = $2,673.00

Jim wants to save money at the end of each month to pay for
some equipment of $1000 at the end of the year. If bank pays
6% interest, compounded monthly, how much Jim has to
deposit every month?
1000
0 1 2 3 4 5 9 10 11 12
A A A A A A A A A=?
𝑖𝑖𝑚𝑚𝑚𝑚 = 6%�12 = 0.5%

𝐴𝐴 = 𝐹𝐹(𝐴𝐴⁄𝐹𝐹, 𝑖𝑖, 𝑛𝑛) = 1000(𝐴𝐴⁄𝐹𝐹, 0.5%, 12) = 1000 0.0811 = $81.10

Uniform Series
Uniform Series Capital Recovery Factor
𝑖𝑖(1 + 𝑖𝑖)𝑛𝑛
𝐴𝐴 = 𝑃𝑃 𝑛𝑛
= 𝑃𝑃(𝐴𝐴⁄𝑃𝑃, 𝑖𝑖, 𝑛𝑛) (4-6)
(1 + 𝑖𝑖) −1
Uniform Series Present Worth Factor

(1 + 𝑖𝑖)𝑛𝑛 −1
𝑃𝑃 = 𝐴𝐴 𝑛𝑛
= 𝐴𝐴(𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛) (4-7)
𝑖𝑖(1 + 𝑖𝑖)

A machine costs $5000 and has a life of 5 years. If
interest rate is 8%, how much must be saved every year
to recover the investment?
A A A A A
0 1 2 3 4 5
5000
A = P ( A P , i, n)
= 5000( A P ,8%,5) = 5000(0.2505) = $1252.50

Should you spend $6800 to buy a contract that pays $140 at
the end of each month for 5 years if the desired return is 1%
per month?
A=140
n=60 i=1%
𝑃𝑃 = 𝐴𝐴 𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛 = 140(𝑃𝑃⁄𝐴𝐴, 1%, 60) = 140 44.955 = $6,293.70

The contract only worth $6,293.70, so reject the offer.

If $6800 is paid for a contract that pays $140 at the end of
each month for 5 years, what is the monthly rate of return?
A=140
n=60 i=?
P=6800
6800 = 140(𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 60) (𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 60) = 48.571
From the compound interest tables,
(P/A, i, 60) = 51.726 when i = 0.5%
(P/A, i, 60) = 48.174 when i = 0.75%
By linear interpolation, rate of return would be 0.72%

A student is borrowing $100 per year for 3 years. The
loan will be repaid 2 years later at a 15% interest rate.
Year Cash Flow 100 100 100
1 +100
0 1 2 3 4 5
2 +100
3 +100
4 0 F=?
5 -F

Solution #1:
A A A A A A
0 1 2 3 4 5 = 0 1 2 3 4 5 + 0 1 2 3 4 5 + 0 1 2 3 4 5
F3
F1 F2
F
𝐹𝐹 = 𝐹𝐹1 + 𝐹𝐹2 + 𝐹𝐹3
= 100(𝐹𝐹 ⁄𝑃𝑃, 15%, 4) + 100(𝐹𝐹 ⁄𝑃𝑃, 15%, 3) + 100(𝐹𝐹 ⁄𝑃𝑃, 15%, 2)
= 100 1.749 + 100 1.521 + 100 1.322 = $459.20

Solution #2: F3 𝐹𝐹3 = 100(𝐹𝐹 ⁄𝐴𝐴, 15%, 3)
A A A=100 = 100 3.472 = $347.20
0 1 2 3 4 5 = 0 1 2 3 4 5
F3
𝐹𝐹 = 𝐹𝐹3 (𝐹𝐹 ⁄𝑃𝑃, 15%, 2)
A A A=100 = 347.20 1.322
0 1 2 3 4 5 = 0 1 2 3 4 5 = $347.20
F F

What amount, P, needs to be deposited in a saving account
that pays 15% interest, to support 3 later withdraws?
Year Cash Flow 3000

2000 2000
0 -P
1 0 0 1 2 3 4
2 +2000
3 +3000
P=?
4 +2000

Solution #1:
3k 3k
2k 2k 2k 2k
0 1 2 3 4 = 0 1 2 3 4 + 0 1 2 3 4 + 0 1 2 3 4
P1 P2 P3
𝑃𝑃 = 𝑃𝑃1 + 𝑃𝑃2 + 𝑃𝑃3

= 2000(𝑃𝑃⁄𝐹𝐹, 15%, 2) + 3000(𝑃𝑃⁄𝐹𝐹, 15%, 3) + 2000(𝑃𝑃⁄𝐹𝐹, 15%, 4)
= 2000 0.7561 + 3000 0.6575 + 2000 0.5718
= $4628

Solution #2:
3k F F1 F2 2k
2k 2k 3k
2k F3
0 1 2 3 = 0 1 2 3 4+ 0 1 2 3 4 +0 1 2 3 4
4
𝐹𝐹 = 𝐹𝐹1 + 𝐹𝐹2 + 𝐹𝐹3

= 2000(𝐹𝐹 ⁄𝑃𝑃, 15%, 2) + 3000(𝐹𝐹 ⁄𝑃𝑃, 15%, 1) + 2000
= 2000 1.322 + 3000 1.150 + 2000 = $8094
3k F
2k 2k
𝑃𝑃 = 𝐹𝐹(𝑃𝑃⁄𝐹𝐹, 15%, 4)
0 1 2 3 4 = 0 1 2 3 4 = 8094 0.5718
= $4628
P P

Solution #3:
3k 3k
2k 2k 2k 2k 2k
2k 2k 20
1k
0 1 2 3 4 1 2 3 4 = 1 2 3 4 + 1 2 3 4
P P1 P1
𝑃𝑃 = 𝑃𝑃1 (𝑃𝑃⁄𝐹𝐹, 15%, 1)

= [2000(𝑃𝑃⁄𝐴𝐴, 15%, 3) + 1000(𝑃𝑃⁄𝐹𝐹, 15%, 2)](𝑃𝑃⁄𝐹𝐹, 15%, 1)
= 2000 2.283 + 1000 0.7561 0.8696
= $4628

Relationships Between
Compound Interest Factors
Single Payment
1
(𝐹𝐹 �𝑃𝑃, 𝑖𝑖, 𝑛𝑛) = (4-8)
(𝑃𝑃⁄𝐹𝐹, 𝑖𝑖, 𝑛𝑛)
Uniform Series
1
(𝐴𝐴�𝑃𝑃, 𝑖𝑖, 𝑛𝑛) =
(𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛)
(4-9)
1
(𝐹𝐹 �𝐴𝐴, 𝑖𝑖, 𝑛𝑛) =
(𝐴𝐴⁄𝐹𝐹, 𝑖𝑖, 𝑛𝑛) (4-10)

Relationships Between
Compound Interest Factors
Uniform Series 𝑛𝑛
(𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛) = �(𝑃𝑃⁄𝐹𝐹, 𝑖𝑖, 𝑡𝑡) (4-11)

𝑡𝑡=1
𝑛𝑛−1
(𝐹𝐹 ⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛) = 1 + � (𝐹𝐹 ⁄𝑃𝑃, 𝑖𝑖, 𝑡𝑡) (4-12)

𝑡𝑡=1
(𝐴𝐴⁄𝑃𝑃, 𝑖𝑖, 𝑛𝑛) = (𝐴𝐴⁄𝐹𝐹, 𝑖𝑖, 𝑛𝑛) + 𝑖𝑖 (4-13)

Arithmetic Gradient
A+4G anggep ini soal tadi trs tahun 4

A+3G jadi acuan, sebagaimana 0 jd
A+2G acuan di diagram ini
4G
A+G 3G
A A A A A A 2G
G
0 1 2 3 4 5 = 0 1 2 3 4 5 + 0 1 2 3 4 5
4 5 6 7 8
Examples:
• Operating and maintenance costs
• Salary packages

Arithmetic Gradient
Notation:
G = a fixed amount increment or decrement per time period
(n-1)G
(n-2)G
2G
G
0
0 1 2 3 n-1 n

Arithmetic Gradient(1)
• Arithmetic Gradient is a series of increasing cash

flows.
• Derivation of arithmetic gradient factor :
(n-1)G
(n-2)G (n-2)G (n-2)G
2G 2G
G G G
0
= + ….. + +
F FI FII FIII
F = G(1+i)n-2 + 2G(1+i)n-3 + … + (n-2)G(1+i)1 + (n-1)G

or
F = G[(1+i)n-2 + 2(1+i)n-3 + … + (n-2)(1+i)1 + (n-1)]
8/23/2021 27
Multiply equation above by (1+i) and factor out G,

(1+i)F = G[(1+i)n-1 + 2(1+i)n-2 + … + (n-2)(1+i)2 + (n-1)(1+i)]
Subtracting two equation above,
F + iF – F = G[(1+i)n-1 + (1+i)n-2 + … + (1+i)2 + (1+i) +1] – nG
The term in the bracket were shown to equal the series compound
amount factor :
n
n −1 n−2 2 1 (1 + i ) −1
[(1 + i ) + (1 + i ) + ... + (1 + i ) + (1 + i ) + 1] =
i
Thus the equation becomes
 (1 + i ) n − 1 
iF G  − nG
 i 
8/23/2021 28
Rearranging and Solving for F,

G  (1 + i ) n − 1 
F  − n
i  i 
Using F = P (1+i)n ,
G  (1 + i ) n − 1  1 
P  − n  n 
i  i  (1 + i ) 
 (1 + i ) n − in − 1 
=G 2 n 
 i (1 + i ) 
 (1 + i ) n − in − 1 
The term in the bracket  2 n  called arithmetic
 i (1 + i ) 
gradient present worth factor and denote by (P/G,i,n)

8/23/2021 29
Using F = A
 (1 + i ) n
− 1 then,
 
 i 
G  (1 + i ) n − 1   i 
=A  − n  n 
i  i  (1 + i ) − 1 
 (1 + i ) n − in − 1
= G n 
 i (1 + i ) − i 
The term in the bracket  (1 + i ) n − in − 1
 n 
 i (1 + i ) − i 
is called arithmetic gradient uniform series factor and denote
by (A/G,i,n)
8/23/2021 30
Arithmetic Gradient
Arithmetic Gradient Present Worth Factor
(1 + 𝑖𝑖)𝑛𝑛 −𝑖𝑖𝑖𝑖 − 1 (4-19)
𝑃𝑃 = 𝐺𝐺 2 𝑛𝑛
= 𝐺𝐺(𝑃𝑃⁄𝐺𝐺, 𝑖𝑖, 𝑛𝑛)
𝑖𝑖 (1 + 𝑖𝑖)
Arithmetic Gradient Uniform Series Factor
(1 + 𝑖𝑖)𝑛𝑛 −𝑖𝑖𝑖𝑖 − 1 1 𝑛𝑛
𝐴𝐴 = 𝐺𝐺 𝑛𝑛
= 𝐺𝐺 −
𝑖𝑖(1 + 𝑖𝑖) −𝑖𝑖 𝑖𝑖 (1 + 𝑖𝑖)𝑛𝑛
= 𝐺𝐺(𝐴𝐴⁄𝐺𝐺, 𝑖𝑖, 𝑛𝑛) (4-20)

Example 4-9 Application of
Arithmetic Gradient Interest Factors
240
210
180 120
90
120150 A=120 60
30
0 1 2 3 4 5 = 0 1 2 3 4 5 + 0 1 2 3 4 5
Year Cash Flow

𝑃𝑃 = 120(𝑃𝑃⁄𝐴𝐴, 5%, 5) + 30(𝑃𝑃⁄𝐺𝐺, 5%, 5)
1 120 = 120 4.329 + 30 8.237
2 150 = $766
3 180
4 210
5 240

24000 A=24000
18000
12000
6000
0 1 2 3 4 = 0 1 2 3 4 + 0 1 2 3 4
6000
12000
Year Cash Flow 18000
1 24000 𝐴𝐴 = 24,000 − 6,000(𝐴𝐴⁄𝐺𝐺, 10%, 4)

2 18000 = 24,000 − 6,000 1.381
3 12000 = $15,714
4 6000

0 1 2 3 4 5 6 7 = 0 1 2 3 4 5 6 7 + 0 1 2 3 4 5 6 7
25 50
75
150 175
200 225 A=150
P P3
𝑃𝑃3 = 150(𝑃𝑃⁄𝐴𝐴, 10%, 4) + 25(𝑃𝑃⁄𝐺𝐺, 10%, 4)
Year Cash Flow = 150 3.170 + 25 4.378
4 150 = $584.95
5 175 𝑃𝑃0 = 𝑃𝑃3 (𝑃𝑃⁄𝐹𝐹, 10%, 3)
6 200 = 584.95 0.7513
7 225 = $439.47

Geometric Gradient (1)
Year Cash Flow

1 100.00 = 100.00
2 100.00 + 10%(100.00) = 100(1 + 0.10)1 = 110.00
3 110.00 + 10%(110.00) = 100(1 + 0.10)2 = 121.00
4 121.00 + 10%(121.00) = 100(1 + 0.10)3 = 133.10
5 133.10 + 10%(133.10) = 100(1 + 0.10)4 = 146.41
8/23/2021 35
100.00
110.00
121.00
133.10
146.41
8/23/2021 36
• From the table, we get : $100.00(1 +

g)n-1
• General Form : An= A1(1 + g)n-1
where : g = Uniform rate of cash flow
A1= Value of A at Year 1
An= Value of A at any Year n
• Present worth Pn of any cash flow An :
Pn = An(1 + i)-n
8/23/2021 37
• So, Pn = A1(1 + g)n-1(1 + i)-n
• This may be rewritten as
n −1
1+ g 
−1
Pn = A1 (1 + i )  
 1+ i 
• Present worth of the entire gradient series of cash flow:
x −1
1+ g 
n
P = A1 (1 + i ) ∑ 
−1

x =1  1 + i 
8/23/2021 38
Geometric Gradient
Notation:
g = a constant growth rate (+ or -) per period
A1 = cash flow at period 1
A1(1+g)n-1
A1(1+g)n-2
A1 (1+g)2
A1 A1(1+g)
0 1 2 3 n-1 n

• In general case where i ≠ g ;
2
−1 1+ g 
−1 −1  1 + g 
P = A1 (1 + i ) + A1 (1 + i )   + A1 (1 + i )  
 1+ i   1+ i 
n −1
−11+ g 
+ ... + A1 (1 + i )  
 1+ i 
• Let a = A1(1 + i)-1 and b = {(1+g) / (1+i)}
then the equation becomes :
8/23/2021 40
P = a + ab + ab2 + …. + abn-1
multiply the equation above by b :
bP = ab + ab2 + ab3 + …. + abn-1 +
abn
subtract two equation above :
P – bP = a – abn
P(1 – b) = a(1 – bn)
P = a(1 – bn) / (1 – b)
8/23/2021 41
• Replacing original value for a and b then :

 1+ g 
n

1− 
  
−1   1+ i  
P = A1 (1 + i )  
1+ g 
 1−   
  1+ i  
 
 1 − (1 + g ) n (1 + i ) − n 
P = A1   where i ≠ g
 i−g 
 
8/23/2021 42
• Cash flow that applicable where the period-by-period change is

a uniform rate
• Using the formula : :
· Geometric series present worth factor where i = g,
1 − (1 + g ) n (1 + i ) − n 
( P / A, g , i, n) =  
 i − g 
· Where i = g :
[
( P / A, g , i, n) = n(1 + i ) −1 ]
8/23/2021 43
Geometric Gradient
Geometric Gradient Present Worth Factor
1 − (1 + 𝑔𝑔)𝑛𝑛 (1 + 𝑖𝑖)−𝑛𝑛
𝑃𝑃 = 𝐴𝐴1 𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤 𝑖𝑖 ≠ 𝑔𝑔
𝑖𝑖 − 𝑔𝑔
(4-28)
𝑛𝑛𝐴𝐴1
𝑃𝑃 = 𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤 𝑖𝑖 = 𝑔𝑔
(1 + 𝑖𝑖) (4-30)

Geometric Gradient Interest Factors
Using 8% interest rate, calculate the Present Worth
of maintenance cost of the first 5 years where the
first year’s cost is estimated at $100, and it
increases at a constant rate of 10% per year.
1 − (1 + 𝑔𝑔)𝑛𝑛 (1 + 𝑖𝑖)−𝑛𝑛
𝑃𝑃 = 𝐴𝐴1
𝑖𝑖 − 𝑔𝑔
1 − (1 + 10%)5 (1 + 8%)−5
= 100
8% − 10%
= $480.42

Continuous Compounding(1)
• Since The interest period is normally one year, we’ll use
the following notation :
-r = Nominal interest rate per year
- m = Number of compounding subperiods per year
- r/m = Interest rate per interest period
- mn = Number of interest periods in n years
F = P(1+i)n may be rewritten as F = P(1+r/m)mn

if we increase m without limit, m becomes very large
approaches infinity, and r/m becomes very small
approaches zero
8/23/2021 46
Single Payment Interest Factors
 If we set x = r/m, then mn may be written as (1/x)(rn)
mn rn
 r
F P  lim (1 + x ) 
1/ x
=F P lim 1 +  =
x →∞
 m  x→∞ 
 Because
lim (1 + x ) = 2.71828
1/ x
= e
x →∞
 F = P(1+i)n becomes F = Pern = P(F/P,r,n) and
 P = F(1+i)-n becomes P = Pe-rn = F(P/F,r,n)
8/23/2021 47
Single Payment Interest Factors
• Example :
If you were to deposit $2000 in a bank that pays
5% nominal interest, compounded continuously,
how much would be in the account at the end of
two years?
r = 0,05 ; n = 2
F = P(er n)
F = 2000(e0,05x2)
= $ 2210,4
8/23/2021 48
Continuous Compounding Interest
Formulas with Uniform Payment Series
Continuous Compounding Sinking Fund

𝑒𝑒 𝑟𝑟 − 1
𝐴𝐴⁄𝐹𝐹, 𝑟𝑟, 𝑛𝑛 = 𝑟𝑟𝑟𝑟 (4-31)
𝑒𝑒 − 1
Continuous Compounding Capital Recovery

𝑒𝑒 𝑟𝑟𝑛𝑛 (𝑒𝑒 𝑟𝑟 − 1)
𝐴𝐴⁄𝑃𝑃, 𝑟𝑟, 𝑛𝑛 = (4-32)
𝑒𝑒 𝑟𝑟𝑟𝑟 − 1

Continuous Compounding Interest
Formulas with Uniform Payment Series
Continuous Compounding Series Compound Amount

𝑒𝑒 𝑟𝑟𝑛𝑛 − 1
𝐹𝐹 ⁄𝐴𝐴, 𝑟𝑟, 𝑛𝑛 = 𝑟𝑟
𝑒𝑒 − 1 (4-33)
Continuous Compounding Series Present Worth

𝑒𝑒 𝑟𝑟𝑟𝑟 − 1
𝐴𝐴⁄𝑃𝑃, 𝑟𝑟, 𝑛𝑛 = 𝑟𝑟𝑟𝑟 𝑟𝑟 (4-34)
𝑒𝑒 (𝑒𝑒 − 1)

Continuous Compounding
$500 were deposited in a credit union (pays 5%
compounded continuously) at the end of each year
for 5 years, how much do you have after the 5th
deposit?
𝑒𝑒 𝑟𝑟𝑟𝑟 − 1 𝑒𝑒 0.05 5 − 1
𝐹𝐹 = 𝐴𝐴[𝐹𝐹 �𝐴𝐴, 𝑟𝑟, 𝑛𝑛] = 𝐴𝐴 𝑟𝑟 = 500 = $2,769.84
𝑒𝑒 − 1 𝑒𝑒 0.05 −1
Or
𝑖𝑖 = 𝑒𝑒 𝑟𝑟 − 1 = 5.1271%
𝐹𝐹 = 500(𝐹𝐹 ⁄𝐴𝐴, 5.1271%, 5) = 500 5.5397 = $2,769.84

Spreadsheets for
Economic Analysis
1. Constructing tables of cash flows
2. Using annuity functions to calculate 𝑃𝑃, 𝐹𝐹, 𝐴𝐴, 𝑛𝑛, or 𝑖𝑖
3. Using block functions to find the present worth or
internal rate of return for a table of cash flows
4. Making graphs for analysis and presentations
5. Calculating “what-if” for different scenarios
kalau compounding
periodnya beda sama
penerimaan/
pengeluaran, pake
bunga efektif

Spreadsheet Annuity Functions
Excel Functions Purpose

-PV (i, n, A, [F], [Type]) To find 𝑃𝑃 given 𝑖𝑖, 𝑛𝑛, and 𝐴𝐴 (𝐹𝐹 is optional)
-PMT (i, n, P, [F], [Type]) To find 𝐴𝐴 given 𝑖𝑖, 𝑛𝑛, and 𝑃𝑃 (𝐹𝐹 is optional)
-FV (i, n, A, [P], [Type]) To find 𝐹𝐹 given 𝑖𝑖, 𝑛𝑛, and 𝐴𝐴 (𝑃𝑃 is optional)
NPER (i, A, P, [F], [Type]) To find 𝑛𝑛 given 𝑖𝑖, 𝐴𝐴, and 𝑃𝑃 (𝐹𝐹 is optional)
RATE (n, A, P, [F], [Type], To find 𝑖𝑖 given 𝑛𝑛, 𝐴𝐴, and 𝑃𝑃 (𝐹𝐹 is optional)
[guess])
Note:
1. Type is the number 0 or 1 and indicates when payments are due (0 for end-of-
the-period, and 1 for beginning-of-the-period). If type is omitted, it is assumed
to be 0.
2. Microsoft Excel solves for one financial argument in terms of the others.
𝑃𝑃(𝐹𝐹/𝑃𝑃, 𝑖𝑖, 𝑛𝑛) + 𝐴𝐴(𝐹𝐹/𝐴𝐴, 𝑖𝑖, 𝑛𝑛) + 𝐹𝐹 = 0 Therefore, negative signs are added to
find the equivalent values in 𝑃𝑃, 𝐴𝐴, and 𝐹𝐹.

Spreadsheet Block Functions

NPV (i, CF1:CFn) To find net present value of a range of cash
flows (from period 1 to n) at a given interest
rate
IRR (CF0:CFn, [guess]) To find internal rate of return from a range of
cash flows (from period 0 to n)

Spreadsheet Functions

Effect (r, m) To find net present value of a range of cash
flows (from period 1 to n) at a given interest rate
IRR (range, [guess]) To find internal rate of return from a range of
cash flows (from period 0 to n)

Minggu 3 - Chapter 04 Equivalence For Repeated Cash Flows

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Minggu 3 - Chapter 04 Equivalence For Repeated Cash Flows

Uploaded by

Copyright:

Available Formats

Note: These PowerPoints were developed to

support the US edition of the text. In some

Copyright Oxford University Press 2014

• Uniform Series Compound Interest

Copyright Oxford University Press 2014

• Solve problems using Uniform Series

Copyright Oxford University Press 2014

• To facilitate equivalence computations, a series of

Copyright Oxford University Press 2014

In the general case for n years,

Multiplying equation above by (1+i),

Factoring out A from two equation above and subtracting them,

Solving equation for F, F = A 

Uniform Series Sinking Fund Factor

Copyright Oxford University Press 2014

500 500 500 500 500

Copyright Oxford University Press 2014

𝑖𝑖𝑚𝑚𝑚𝑚 = 6%�12 = 0.5%

Copyright Oxford University Press 2014

Uniform Series Present Worth Factor

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

𝑃𝑃 = 𝐴𝐴 𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛 = 140(𝑃𝑃⁄𝐴𝐴, 1%, 60) = 140 44.955 = $6,293.70

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

Year Cash Flow 3000

Copyright Oxford University Press 2014

𝑃𝑃 = 𝑃𝑃1 + 𝑃𝑃2 + 𝑃𝑃3

Copyright Oxford University Press 2014

𝐹𝐹 = 𝐹𝐹1 + 𝐹𝐹2 + 𝐹𝐹3

Copyright Oxford University Press 2014

𝑃𝑃 = 𝑃𝑃1 (𝑃𝑃⁄𝐹𝐹, 15%, 1)

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

(𝑃𝑃⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛) = �(𝑃𝑃⁄𝐹𝐹, 𝑖𝑖, 𝑡𝑡) (4-11)

(𝐹𝐹 ⁄𝐴𝐴, 𝑖𝑖, 𝑛𝑛) = 1 + � (𝐹𝐹 ⁄𝑃𝑃, 𝑖𝑖, 𝑡𝑡) (4-12)

(𝐴𝐴⁄𝑃𝑃, 𝑖𝑖, 𝑛𝑛) = (𝐴𝐴⁄𝐹𝐹, 𝑖𝑖, 𝑛𝑛) + 𝑖𝑖 (4-13)

Copyright Oxford University Press 2014

A+4G anggep ini soal tadi trs tahun 4

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

• Arithmetic Gradient is a series of increasing cash

F = G(1+i)n-2 + 2G(1+i)n-3 + … + (n-2)G(1+i)1 + (n-1)G

Multiply equation above by (1+i) and factor out G,

Rearranging and Solving for F,

gradient present worth factor and denote by (P/G,i,n)

Copyright Oxford University Press 2014

Year Cash Flow

Copyright Oxford University Press 2014

1 24000 𝐴𝐴 = 24,000 − 6,000(𝐴𝐴⁄𝐺𝐺, 10%, 4)

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

Year Cash Flow

• From the table, we get : $100.00(1 +

Copyright Oxford University Press 2014

• Replacing original value for a and b then :

• Cash flow that applicable where the period-by-period change is

Copyright Oxford University Press 2014

Copyright Oxford University Press 2014

F = P(1+i)n may be rewritten as F = P(1+r/m)mn