Engineering

Economics
Chapter 2 Factors: How Time and Interest Affect
Money
 Single-Amount Factors (F/P and
P/F )
• The factor that determines:-
• the amount of money F
• accumulated after n years (or periods)
• from a single present worth P,
• with interest compounded one time per year (or period)
• Formula can be generalized for n years. To find F , given P ,
Single-Amount Factors (F/P and
P/F )
Single-Amount Factors (F/P and
P/F )
Single-Amount Factors (F/P and
P/F )
Single-Amount Factors (F/P and
P/F )
Single-Amount Factors (F/P and
P/F )Example
Single-Amount Factors (F/P and P/F )Example
Table 15 from page 595 to 609
Single-Amount Factors (F/P and P/F ) Example
Table 15 from page 595 to 609
Uniform Series Present Worth
Factor and Capital Recovery
Factor
• The equivalent present worth P of a uniform series A of end-of-period cash
flows (investments) is shown
Uniform Series Present Worth
Factor and Capital Recovery
Factor
Uniform Series Present Worth
Factor and Capital Recovery
Factor
Sinking Fund Factor and
Uniform Series Compound
Amount Factor
Sinking Fund Factor and
Uniform Series Compound
Amount Factor
Sinking Fund Factor and
Uniform Series Compound
Amount Factor (Cash Flow)
Sinking Fund Factor and
Uniform Series Compound
Amount Factor (Cash Flow)

Table 18
 Arithmetic Gradient Factors

• E.g. a manufacturing engineer predicts that the cost of maintaining a robot will increase
by $5000 per year until the machine is retired. The cash flow series of maintenance costs
involves a constant gradient, which is $5000 per year
• Assume that the cash flow at the end of year 1 is the base amount of the cash flow
series
• For example, if you purchase a used car with a 1-year warranty, you might expect to pay
the gasoline and insurance costs during the first year of operation. Assume these cost
$2500; that is, $2500 is the base amount.
• If you estimate that total costs will increase by $200 each year, the amount the second
year is $2700, the third $2900, and so on to year n , when the total cost is 2500 + ( n -
1)200
Arithmetic Gradient Factors
Arithmetic Gradient Factors
Arithmetic Gradient Factors
 Geometric Gradient Series
Factors
• Annual revenues and annual costs such as maintenance, operations, and labor
to go up or down by a constant percentage, for example, +5% or -3% per year.
This change occurs every year on top of a starting amount in the fi rst year of
the project.
Geometric Gradient Series
Factors
Geometric Gradient Series Factors
Cash Flow increasing and decreasing
The END