Economics and uniform series formula

 

 

Note: Enter interest(i) in decimal form. For example, an interest rate of 15% would be entered as 0.15

Change Equation

Select an equation to solve for a different unknown

Discrete Compounding Discount Factors

		capital recovery
		single payment compound amount
		single payment present worth
		uniform gradient future worth
		uniform gradient present worth
		uniform gradient uniform series
		uniform series compound amount
		uniform series present worth
		uniform series sinking fund

example:

A Machine at a cost of $5,000 was purchased 3 years ago. It can be sold now for $3,000. If the machine is kept, the annual operating and maintenance costs will be $1,500. If it is kept and operated for next five years, determine the amount at time 0 (now) equivalent to the cost of owning and operating the machine can be sold for $1,000 at the end of the five year period. Use an interest rate of 10%.

A. 8065

B. 6550

C. 9522

D. 5002

solution:

F = P(1 + i)^n

F = A [((1 + i)^n - 1))/i]

P = A [((1 + i)^n - 1))/((i(1 + i)^n))]

P = $3,000

Operating and maintenance costs / year = $1,500

n = 5 years

Salvage value = $1,000

Interest rate = 10%

PW of costs = 3,000 + 1,500 (P/A, 10%, 5) - 1,000(P/F, 10%, 5)

= 3,000 + 1,500 (3.791) -1,000(0.6209)

= $8,065.60

The answer is, “A”.