TIME VALUE of MONEY

Economic basis to evaluate

engineering projects

syamsul irham
TIME VALUE OF MONEY
 Learning Objective

After this class the students should be able to:

• Define the interest rate for calculating the time value of

money.

• Contrast simple and compound interest.

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TIME VALUE OF MONEY
 Warm-up (# 1)
1. If you had the possibility to receive $ 10,00.00 now or
another amount one year from now, how much would you
like to receive one year from now?

2. The engineering group of Baker Designs must decide

whether to spend $90M (M for thousands) on a new project.
This project will cost $5M per year for operations, and it will
increase revenues by $20M annually. Both the costs and the
revenues will continue for 10 years. Should the project be
done?
 Each person has a different answer for these questions, but
the interaction among people in the financial market, under
the same condition, offer us only one answer, which can be
determined through the interest rate.
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TIME VALUE OF MONEY
 Warm-up (# 2)
• A dollar today, a dollar a year from now,
and a dollar 10 years from now differ in
value. These dollars that occur at different
times must be combined to evaluate
engineering projects. How is the difference
in value due to the time value of money
accounted for?

syamsul irham
TIME VALUE OF MONEY
 Key Words and Concepts
• Interest : The return on capital.
• Capital : Invested money and resources
• Cash Flow diagram : The pictorial description of
when dollars are received and spent.
• Equivalence Occurs : when different cash flows
at different times are equal in economic value at a
given interest rate.
• Present worth : A time 0 cash flow that is
equivalent to one or more later cash flows.
• Nominal interest rate : The rate per year without
adjusting for the number of compounding periods.
• Effective interest rate : The rate per year after
adjusting for the number of compounding periods
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TIME VALUE OF MONEY
 What is Interest?

• Interest is a rental fee for money; that is, a

fee paid or a fee earned for the use of
money.
• Engineering economy generalizes this
definition. Interest is the return on Capital.
Capital, in turn, is invested money and
resources. .

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TIME VALUE OF MONEY
 Interest Rate

• Interest rate equals the ratio of the interest

amount and the capital amount.
• If the interest rate is 5 %, $5 of interest is
paid when $ 100 is borrowed for a year or
a month (a given period of time).

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TIME VALUE OF MONEY
 Interest Rates Vary

Example interest rates

August, 1991 May, 1994 This Month Type of Investment or Loan
6.75% 4.25% Series EE savings bond
5.25% 3% Daily passbook savings account
6.50% 4.25% 1 - year certificate of deposit
8.50% 6.75% Prime rate (loans to corporations)
7.25% 7% Adjustable rate mortgage
9% 8.75% Fixed rate mortgage
10.75% 7.50% New car loan
12.25% 8.25% Used car loan
16 to 18% 14 to 16% Credit card account

Table 1

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TIME VALUE OF MONEY
 Interest rate and Risk.

• Drilling an oil well, developing a new

computer chip, and building a new
municipal transit system are relatively
risky.
• Opening a new gas station, redesigning a
production line, and building a new
municipal water reservoir are less risky.
• Riskier projects are required to generate a
higher rate of return.
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TIME VALUE OF MONEY
 Interest and the time value of money

Interest is used to calculate the time value

of money, and it is crucial to the practice of

engineering.

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TIME VALUE OF MONEY
1.2. BUNGA SEDERHANA (Simple interest)

Rp.1000,- diusahakan selama 3 tahun dengan bunga 5% per tahun,

Setelah 3 tahun akan menjadi Rp. 1150,- :

• Bunga per tahun = 5% x 1000 = Rp. 50,-

• Bunga selama 3 tahun = 3 x 50 = Rp. 150,-
• Pengembalian modal = Rp. 1000,-
• Jumlah akhir tahun ke-3 = Rp. 1150,-

• Nilai uang pada masa datang dirumuskan :

F = P (1+i.n)
F = nilai uang masa datang
P = nilai uang saat ini
i = tingkat bunga per periode
n = lamanya periode penelaahan
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TIME VALUE OF MONEY
1.2. BUNGA SEDERHANA (Simple interest)

Contoh 1:

$ 10.000 dipinjam dari sebuah bank dengan bunga

16%/thn. Jika utang tersebut dibayar pada pertengahan
tahun, berapa jumlah yang harus dibayar ?

Jawab : Simple Interest

F = P (1 + i.n) = 10.000 (1 + 0.16*0.5)= $ 10.800

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TIME VALUE OF MONEY
1.3. Bunga Majemuk (compound interest)
Nilai bunga yang dihasilkan pada akhir setiap periode
ditambahkan kembali pada pokok pinjaman semula.

Rp. 1000,- disimpan dengan tingkat bunga 5% per tahun, pada

akhir tahun ke tiga uang tersebut akan menjadi Rp. 1157,6,-

Tahun Jml. Uang yang disimpan Bunga (5%) Jumlah uang pada
ke pada awal thn ybs. Selama tahun ybs. akhir tahun ybs
1 1.000,00 0,05 x 1000,00 1050,00
2 1.050,00 0,05 x 1050,00 1102,50
3 1.102,50 0,05 x 1102,50 1157,60

Nilai uang pada masa datang dirumuskan :

F = P (1+i)n F=P = P (F/P, i%, n)

(1+i)n = = (F/P,i%,n) = future value factor

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TIME VALUE OF MONEY
Tabel bunga : Formula Nilai Waktu dari UANG
Perubahan nilai uang terhadap waktu untuk kasus tertentu dapat
dirumuskan pada Tabel-1 berikut :
No. Faktor Formula Notasi

1. Pembayaran Tunggal Bunga Berbunga (Compound (F/P, i %, n)

(1+i)n
Amount Factor)
2. Pembayaran Tunggal Nilai Sekarang (Present (P/F, i %, n)
( 1 + i ) –n
Value Factor)
3. Pembayaran Uniform (Series Compound Amount (1 + i )n –1 (F/A, i %, n)
Factor). i
4. Simpanan Teratur (Sinking Fund Factor). i (A/F, i %, n)
(1 + i )n –1
5. Penerimaan Teratur (Capital Recovery Factor). (A/P, i %, n)
i(1+i)n
(1 + i )n-1

6. Nilai sekarang pembayaran uniform (series PV) (1 + i )n –1 (P/A, i %, n)

i (1 + i )n
7. Gradient Uniform 1 n n (A/G, i %, n)
i (1 + i )n –1
8. Gradient Present Value. 1 – (1 + ni) / (1+i)n (P/G, i %, n)
i2
P = a present lump sum of money
F = a future lump sum of money (received n periods from now)
A = an end of period payment or received in a uniform series continuing for n periods
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TIME VALUE OF MONEY
Interest Rate & TIME VALUE OF MONEY
Present value factor
Contoh 1 :

Uang sebesar Rp. 1.000.000,- jika disimpan selama 8 tahun dengan

tingkat bunga 10% per tahun akan menjadi :

Jawab :

F = P (F/P, i %, n) = P (F/P, 10%, 8) = P (1+i) n = P (1+0,10) 8

= Rp. 1.000.000 x (1+0,10)8
= Rp. 2.143.600,-

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TIME VALUE OF MONEY
Interest Rate & TIME VALUE OF MONEY
Present Value factor
Contoh 4 :

Uang sebesar Rp. 1.000.000,- yang diterima 8 tahun mendatang dengan

tingkat bunga 10 persen per tahun, nilai sekarangnya adalah :

Jawab : Rp.1.000.000

1 2 3 4 5 6 7 8
P = F (P/F, i %, n)
?
= F (P/F, 10%, 8)
= F (1+i) -n
= Rp. 1.000.000 x (1+0,10)-8
= Rp. 1.000.000,- x (0,4665)
= Rp. 466.500,-

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TIME VALUE OF MONEY
Interest Rate & TIME VALUE OF MONEY
Sinking fund factor (simpanan teratur)
Contoh 5 :

Jika anda ingin menjadi seorang milioner 20 tahun dari sekarang ,

berapa yang harus ditabung setiap bulan jika bunga bank 1 %/bulan ?

Jawab :

F = USD. 1.000.000
i = 0.01 per bulan
n = (20)(12) = 240
A= ?
A = F (A/F, i %, n) = 1.000.000 x 0.01/{(1+0.01)240 -1} = 1.000.000. (A/F, 0.01, 240)
A = USD 1.011

Simpanan Teratur (Sinking Fund Factor). i (A/F, i %, n)

(1 + i )n –1

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TIME VALUE OF MONEY
Interest Rate & TIME VALUE OF MONEY
Sinking fund factor (simpanan teratur)
Contoh 6 :

Jika kita mengharapkan mempunyai tabungan sebanyak Rp. 10.000.000,-

pada akhir tahun kedelapan dengan tingkat bunga 10 persen per
tahun, maka tiap tahun kita harus menabung :

Jawab :

A = F (A/F, i %, n)
= F (A/F, 10%, 8)
0,10
= Rp. 10.000.000 x
(1+0,10)8 - 1

= Rp. 10.000.000,- x (0,0874)

= Rp. 874.900,-

syamsul irham
TIME VALUE OF MONEY
Interest Rate & TIME VALUE OF MONEY
Penerimaan teratur (capital recovery factor)

Contoh 7 :

Jika kita meminjam Rp. 10.000.000,- dengan bunga 15 persen per tahun
dan hendak melunasinya selama 10 tahun, maka tiap tahun harus
membayar :

Jawab :

A = P (A/P, i %, n)
= P (A/P, 15%, 10)
0,15 (1 + 0,15) 10
= Rp. 10.000.000 x
(1+0,15)10 - 1

= Rp. 10.000.000,- x (0,199)

= Rp. 1.990.000,-

Penerimaan Teratur (Capital Recovery Factor). i(1+i)n (A/P, i %, n)

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TIME VALUE OF MONEY
Interest Rate & TIME VALUE OF MONEY

Contoh 8 :

Jika kita membayar cicilan Rp. 1.000.000,- per tahun dengan bunga 15%
per tahun selama 10 tahun, maka nilai sekarangnya adalah :

Jawab :
P = A (P/A, i %, n)
= A (P/A, 15%, 10)
= Rp. 1.000.000 , (1+0,15)10 - 1
0,15 (1 + 0,15) 10

= Rp. 1.000.000,- x (5,019)

= Rp. 5.019.000,-

Nilai sekarang pembayaran uniform (series PV) (1 + i )n –1 (P/A, i %, n)

i (1 + i )n
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TIME VALUE OF MONEY
Interest Rate & TIME VALUE OF MONEY

Tabel 2 Formula Hubungan Berbagai Faktor Bunga

No
Faktor Hubungan
.
1. (F/P) dan P/F) (F/P, i %, n) = 1 / (P/F, i%, n)

2. (F/A) dan (A/F) (F/P, i %, n) = 1 / (A/F, i%, n)

3. (A/P) dan (P/A) (A/P, i %, n) = 1 / (P/A, i%, n)

n
4. (A/P) dan (P/A) (P / A, i %, n) = + / (P / F, i%, t)
t=1
n-1
5. (P/A) dan (P/F) (F / A, i %, n) = 1 + (F / P, i%, t)
t=1

6. (F/A) dan (F/P) (A/P, i%, n) = (A/F, i%, n) + i%

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TIME VALUE OF MONEY
Quiz

 Buat Tabel Present Value Factor

(1+i)-n
 Untuk interest rate i : 5% dan 25 %
 Dengan n : 5 , 10, 15, dan 25 tahun
 Plot dalam sketsa grafik : Present
Value Factor vs n, untuk masimg2
interest rate i
End View

syamsul irham
TIME VALUE OF MONEY