Cost Indexes:

General Annuity:

Cost at time A Index value at time A

Cost at time B Index value at time B

(1 ieq ) p (1 ic )c

Power sizing:

ieq (1 i )c / p 1

Cost of asset A Size (capacity) of asset A

Cost of asset B Size (capacity) of asset B

x power - sizing exponent

Learning Curve:
TN Tinitial N b
b

log(learning curve rate)

log 2

TN time to make Nth unit

Tinitial time to make first unit
N number of finished units
b learning curve exponent

Simple Interest:

Interest earned on amount P : I Pin

Maturity value : F P (1 in)

ieq interest rate for payment period

p number of payment periods per year
ic interest rate for compounding period
c number of compounding periods per year

Ordinary Simple Annuity (Uniform Series):

(1 i ) n 1
Compound Amount
F A

i
A F

n
(1 i ) 1

Sinking Fund

i (1 i ) n
A P

n
(1 i ) 1

Capital Recovery

(1 i ) n 1
P A

n
i (1 i )

1 (1 i ) n
A

i interest rate per time period

A periodic payment (end of period)

n number of time periods

P, F , i, n as above for compound interest

Compound Interest (Single Payment):

Arithmetic Gradient Annuity:

1

n
Aeq G

n
i (1 i ) 1

F P (1 i ) n
F future value
P present value
i periodic interest rate
n number of periods

Effective Interest Rates:

r
i
m

(1 i ) n in 1
P G

2
n
i (1 i )

Aeq equivalent periodic payment

G gradient amount (periodic increment)
P, i, n as above for compound interest

r
(1 ieff ) 1 m

r nominal interest rate per year

Geometric Gradient Annuity:

1 (1 g ) n (1 i ) n
P A1
; i g
ig

m number of compounding periods per year

i periodic interest rate

ieff effective interest rate (compounded annually)

Annuity Due:
[Appropriate formula for question](1+i)

Perpetual Annuities:
A
P
i
A
Geometric Growth : P
;i g
ig

nA1
;i g
(1 i )

(1 i ) n (1 g ) n
F A1
; i g
ig

n 1
F nA1 (1 i ) ; i g
A1 payment in first period (end)
g periodic rate of growth
P, F , i, n as above for compound interest

Present Worth

Relationships:
NPV/W net present va lue/worth
NPW PWc PWb
A Pi for n
Capitalized cost P

i
EACF equivalent annual cash flow
EACF EUAC EUAB
NPW EACF(Capital recovery factor)
EACF NPW(Presen t worth factor)
IRR internal rate of return
MARR minimum acceptable rate of return

To find rate of return :

PW of benefits PW of costs 0
PW of benefits/PW of costs 1
Present worth Net present worth 0
EUCF EUAB EUAC 0
PW of costs PW of benefits

Salvage Value (using capital recovery formula):

EUAC = P(A/P, i, n) S(A/F, i, n)
EUAC = (P S)(A/F, i, n) + Pi
EUAC = (P S)(A/P, i, n) + Si

S Salvage value
P, F , i, n as above for compound interest