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Equation (2021) is termed the annuity compoundamount factor, and (1 the compoundamount factor in Software
Equation (2021) is termed the annuity compoundamount factor, and (1 the compoundamount factor Encode PDF417 2d Barcode In None Using Barcode generator for Software Control to generate, create PDF417 2d barcode image in Software applications. PDF417 Decoder In None Using Barcode decoder for Software Control to read, scan read, scan image in Software applications. ENGINEERING ECONOMY, PATENTS, AND COPYRIGHTS
Encoding PDF417 In Visual C# Using Barcode encoder for .NET framework Control to generate, create PDF417 image in VS .NET applications. PDF417 2d Barcode Generation In Visual Studio .NET Using Barcode maker for ASP.NET Control to generate, create PDF417 2d barcode image in ASP.NET applications. The reciprocal of Eq (2021) is known as the annuity sinkingfund factor and can be used to determine yearly depreciation cost It is expressed as follows: R S (1 i i)n 1 (2022) Printing PDF417 2d Barcode In .NET Using Barcode creation for VS .NET Control to generate, create PDF417 image in Visual Studio .NET applications. PDF417 Maker In VB.NET Using Barcode maker for .NET Control to generate, create PDF417 2d barcode image in .NET applications. where i / [(1 i)n 1] is the sinkingfund factor An analysis of Eq (2022) shows that equal amounts of R, when invested at i percent interest, will accumulate to some speci ed future amount S over a period of n years In terms of depreciation expense, it shows that equal yearly depreciation costs invested at an i percent interest rate for n years will accumulate to an amount equal to the original cost of the equipment The present worth (PW) of an annuity is the principal which would have to be invested at the present time at compound interest i to yield a total amount at the end of the annuity term equal to the amount of the annuity In other words, it is the present amount (PW) that can be paid off through equal annual payments of R over n years at i percent interest Combining Eq (2024) with Eq (2021) gives PW(1 or PW R (1 i)n 1 i(1 i)n i)n S R (1 i)n i 1 (2023) Code 128C Drawer In None Using Barcode creation for Software Control to generate, create Code 128B image in Software applications. Make EAN13 Supplement 5 In None Using Barcode generator for Software Control to generate, create GTIN  13 image in Software applications. Equation (2023) is known as the annuity presentworth factor, where [(1 i)n 1] / i(1 i)n is the presentworth factor The reciprocal of Eq (2023) is known as the annuity capitalrecovery factor It is the annual payment R required to pay off some present amount PW over n years at i percent interest It can be expressed as follows: R PW i(1 i)n (1 i)n 1 (2024) EAN / UCC  13 Drawer In None Using Barcode drawer for Software Control to generate, create UCC128 image in Software applications. Printing USS Code 39 In None Using Barcode creator for Software Control to generate, create ANSI/AIM Code 39 image in Software applications. 3 Maximum Payback Time This is the maximum acceptable payback time (PTM) which is set by the rm based on minimum acceptable return on investment and on the time value of money Accordingly, Data Matrix ECC200 Creator In None Using Barcode generator for Software Control to generate, create Data Matrix 2d barcode image in Software applications. Bar Code Maker In None Using Barcode generation for Software Control to generate, create barcode image in Software applications. 1 i(1 i) (1 i)n 1
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ECC200 Maker In Java Using Barcode generation for Android Control to generate, create Data Matrix image in Android applications. Creating Code 39 In Java Using Barcode drawer for Java Control to generate, create ANSI/AIM Code 39 image in Java applications. length of useful life of the project minimum acceptable return on investment depreciation rate income tax rate (federal plus state) 4 DiscountedCashFlow Analysis The most popular method for evaluating investment alternatives, taking into account the time value of money, is the discountedcash ow (DCF) method It includes all cash ows over the entire life of CHAPTER TWENTY
the project and adjusts them to one point xed in time, usually the time of the original investment The method requires a trialanderror calculation to determine the compound interest rate at which the sum of all the timeadjusted cash out ows (investment) equals the sum of all the timeadjusted cash in ows (net pro t plus depreciation) The main attractiveness of this technique is that it considers both the amount and the timing of all cash in ows and out ows The discountedcash ow rate of return is the aftertax interest rate i at which capital could be borrowed for the investment and just break even at the end of the useful life n of the project To determine the DCF rate of return, the present worth PW of the project or net cash ow (NCF) (net pro t plus depreciation) compounded on the basis of endofyear income is expressed as PW NCF1 1 (1 i)1 i)2 i)n i)1 NCF2 1 (1 i)2 NCFn 1 (1 i)n (2026) where 1 / (1 1 / (1 1 / (1 present worth at the end of year 1 present worth at the end of year 2 present worth at the end of the project Then the present worth of the xed investment I compounded at interest rate i plus working capital (Iw) is expressed as PW (I Iw)0 1 (1 i) Iw)1 1 (1 I) Iw)n
1 (1 i)n (2027) where 1 / (1 i)0 is the present worth at the start of the project If only one time investment is made, at the beginning of the project, then Eq (2027) becomes PW (I Iw)0 1 (1 i)0 I 1 Iw I Iw The present worth of the investment must be equal to the present worth of the cash ows; that is, investment (cash out ows, or O) must equal the sum of all the timeadjusted cash in ows Therefore, we set Eq (2026) equal to Eq (2027): I Iw NCF1 (1 i)1 NCF2 (1 i)2 NCFn (1 i)n (2028) or expressed differently, O (I Iw) NCF1 (1 i)1 NCF2 (1 i)2 NCFn (1 i)n (2029) A trialanderror calculation is required to determine the DCF rate of return i Since the discountedcash ow rates of return are only approximated by the process of interpolation, a slight error is introduced To keep the error to a minimum, interpolation should only be attempted between adjacent tabled values, for example, between 10 and 11 percent Interpolation between, say, 2 and 10 percent would increase the error greatly

