Kewirausahaan

Konsep-Konsep Keuangan

DTETI
2021
 Present & Future Values
• A present value is the discounted value of one or more future cash flows
• A future value is the compounded value of a present value
• The discount factor is the present value of a money invested in the future
• The compounding factor is the future value of a money invested today
• Basic time value of money relationships:

PV  FV  DF
FV  PV  CF
where PV = present value;
FV = future value;
DF = discount factor = 1 / (1  R )t
CF = compounding factor = (1  R )t
R = interest rate per period; and
t = time in periods
 Value and Interest

• The “value” of money depends on the amount and when

it is received or spent.

Example: What amount must be paid to settle a current debt of $1000 in

two years at an interest rate of 8% ?

Solution: $1000 (1 + 0.08) (1 + 0.08) = $1166

$1000

1 2

$1166
 Cash Flow Diagrams

P-Pattern “present”
1 2 3 n

F-Pattern “future”
1 2 3 n

A-Pattern “annual”
1 2 3 n

G-Pattern “gradient”
1 2 3 n
Equivalence of Cash Flow Patterns

To Find Given Multiply By Formula

F P ( F / P )in (1  i )n

P F ( P / F )in
1
(1  i )n
A P ( A / P) n i (1  i ) n
i
(1  i ) n  1
A G ( A / G )in
1

n
i (1  i ) n  1
 Cash Flow Example
Example: A new circuit board component insertion tool will save
$50,000 in production costs each year and will have a life of seven
years. What is the highest price that can be justified for the tool using
a 12% interest rate?

50k 50k 50k 50k 50k 50k 50k

Solution:
1 2 3 4 5 6 7

P (1  i ) n
1
P  ( P / A)12%
7 A  A
i (1  i ) n

(1  0.12)7  1
 $50,000
0.12(1  0.12) 7

 4.56  $50,000  $228k

 Single Sum Factors

• Present value interest factor and future value interest factor:

PV  FV  PVIF
FV  PV  FVIF
where
1
PVIF 
(1  R )t
FVIF  (1  R)t
 Single Sum Factors Example
You just invested $2,000 in a three-year bank certificate of
deposit (CD) with a 9 percent interest rate.

How much will you receive at maturity?

FV  $2, 000 1.093

 $2, 000 1.2950
 $2,590
 How We Get Present & Future Value
Tables
• Standard time value of money tables present factors for:
o Present value of a single sum
o Present value of an annuity
o Future value of a single sum
o Future value of an annuity
• Relationships:
o You can use the present value of a single sum to obtain:
• The present value of an annuity factor (a running total
of the single sum factors)
• The future value of a single sum factor (the inverse of
the present value of a single sum factor)

9
 Compounding
• Definition
o refers to the frequency with which interest is computed and added to
the principal balance
o The more frequent the compounding, the higher the interest earned

• Discrete versus continuous intervals

o we can count the number of compounding periods per year
• E.g., once a year, twice a year, quarterly, monthly, or daily
o Continuous compounding results when there is an infinite number of
compounding periods

• Nominal versus effective yields

 Discrete Intervals
• Mathematical adjustment for discrete compounding:
FV  PV (1  R / m) mt

R  annual interest rate

m  number of compounding periods per year
t  time in years

• Mathematical equation for continuous compounding:

FV  PVe Rt

e  2.71828
 Discrete vs
Continuous Intervals Example
Your bank pays you 3 percent per year on your savings account. You just
deposited $100.00 in your savings account.
What is the future value of the $100.00 in one year if interest is compounded
quarterly? If interest is compounded continuously?

•For quarterly compounding: FV  PV (1  R / m) mt

 $100.00(1  0.03 / 4) 4
 $103.03
•For continuous compounding:
FV  PVe Rt
 $100.00  e0.03
 $103.05
 Nominal vs Effective Yields
• The stated rate of interest is the simple rate or nominal rate
o 3.00% in the example
• The interest rate that relates present and future values is the
effective rate
o $3.03/$100 = 3.03% for quarterly compounding
o $3.05/$100 = 3.05% for continuous compounding
 Growing Income Streams
• Definition
o A growing stream is one in which each successive cash flow is larger
than the previous one
• A common problem is one in which the cash flows grow by some
fixed percentage

• Growing annuity

• Growing perpetuity
 Growing Annuity and Perpetuity
• A growing annuity is an annuity in which the cash flows grow
at a constant rate g:
C C (1  g ) C (1  g ) 2 C (1  g ) n
PV     ... 
(1  R ) (1  R) 2
(1  R) 3
(1  R ) n 1
C1   1  g  
N

 1    
R  g   1  R  

• A growing perpetuity is an annuity where the cash flows

continue indefinitely:
C C (1  g ) C (1  g ) 2 C (1  g )
PV     ... 
(1  R) (1  R ) 2
(1  R) 3
(1  R) 

Ct (1  g )t 1 C1
 
t 1 (1  R )t Rg
 Evaluating Alternatives
• Annual Equivalent Cost Comparisons
• Present Equivalent Cost Comparisons
• Incremental Approach
• Rate of Return Comparisons
• Benefit/Cost Comparisons

Minimum Attractive Rate of Return (MARR): The lowest rate of

return that the organization will accept.
 Annual Equivalent Cost Comparison
• Incomes are converted to an A-pattern.
• Costs are converted to an A-pattern.
• The costs are subtracted from the incomes to determine the
ANEV.
• Mutually Exclusive Alternatives – choose the one with highest
ANEV
• Independent Alternatives – choose all with positive ANEV

ANEV: Annual Net Equivalent Value

 ANEV Example
Example: A new circuit board component insertion tool is needed.
Which should you buy?
Model Price Annual Maintenance Salvage Value Life
JACO $220k $20k $30k 10 years
Cheepo $100k $35k 0 5 years

Solution: The ANEV is calculated for each:

JACO: ANEV  ( A / P )10%

10 220k  20k  ( A / F )10%
10 30k

 35.8k  20k  1.9k  53.9k

Cheepo: ANEV  ( A / P )10%

5 100k  35k

 $61.4k
 Present Equivalent Cost Comparison
• Incomes and costs are converted to P-patterns.
• The costs are subtracted from the incomes to determine the
PNEV.
• Mutually Exclusive Alternatives – choose the one with highest
PNEV
• Independent Alternatives – choose all with positive PNEV

PNEV: Present Net Equivalent Value, also called “life cycle cost,”
“present worth,” “capital cost,” and “venture worth.”
 Incremental Approach

• For a set of mutually exclusive alternatives, only the

differences in amounts need to be considered.

Model Price Annual Maintenance Salvage Value Life

JACO $220k $20k $30k 10 years
Cheepo $100k $35k 0 5 years

JACO- Cheepo:

PNEV  120k  ( P / A)10%

10 15k  ( P / F )10%
5 100k  ( P / F )10%
10 30k

 120k  92.2k  62.1k  11.6k  $45.9k

 Rate of Return Method
• ANEV or PNEV is formulated
• From this, we solve for the interest rate that will give zero
ANEV or PNEV
• This interest rate is the ROR of the alternative
• For mutually exclusive alternatives, the one with the highest
ROR is chosen
• For independent alternatives, all with a ROR greater than
MARR are accepted

ROR: Rate of Return on Investment

 Cost Benefit Analysis Summary
Measure
• Usual summary measure is the Benefit Cost (BC) ratio.
• BC ratio=Benefits in $ terms/costs in $ terms
o Benefits exceed costs when ratio is > 1.
o We want the BC ratio to be greater than one.
o Ratio of 2.0 implies that for every $1 spent on the program
there is $2 returned in benefits
 Benefit/Cost Comparisons

• The benefit/cost ratio is determined from

B uniform net annual benefits

C annual equivalent of initial cost

• For mutually exclusive alternatives, the one with the highest

B/C is chosen.
• For independent alternatives, all with B/C > 1 are accepted.

The MARR is used to determine the denominator (cost).

 Break-Even Analysis
• Break-even point: the value of an independent variable such
that two alternatives are equally attractive.
• For values above the break-even point, one alternative is
preferred.
• For values below the break-even point, the other is preferred.
• Break-even analysis is useful when dealing with a changing
variable (such as MARR).
 Income Tax and Depreciation
• Businesses pay the IRS a tax:
 gross revenue-operating costs 
TAX  R   
 -interest paid-depreciation 

• Depreciation: method of charging the initial cost of an asset

against more than one year.
• An asset is depreciable if :
o It is used to produce income,
o Has a life greater than one year, but
o Decays, wears out, becomes obsolete, or gets used up.

ACRS: Accelerated Cost Recovery System, used by IRS since 1980.

 Inflation
• The buying power of money changes with time.
• Inflation, if anticipated, can be put to good use by fixing costs
and allowing income to rise by
o Entering long-term contracts for materials or wages
o Purchasing materials long before they are needed
o Stockpiling product for sale later.
 Conclusion
• For-profit enterprises exist to make money.
• Non-profit entities also make decisions to maximize the
goodness of outcomes by assigning dollar values.
• Your engineering decisions will be shaped by economics.

$$ Rp. Rp.