ENGINEERING

ECONOMY
Chapter 4: The Time Value of Money
(PART 2)
4.7 Uniform Series
CAPITAL RECOVERY SERIES COMPOUND AMOUNT
FACTOR FACTOR

 i1 i   1 i 1

n
n

A  P FA  

 1 i 1  
n i

A  P(A/P,i, n) F  A (F/A,i,n)

SERIES PRESENT WORTH SINKING FUND FACTOR

FACTOR
 i 
 1 in  1 A F  
P A  n   1 i 1
n

 i1 i 

P  A (P/A, i, n) A  F(A/F,i,n)

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
2
There are interest factors for a series of end-of-
period cash flows.

(1 + 𝑖)𝑛 −1 Finding F
𝐹=𝐴 = 𝐴(𝐹 Τ𝐴 , 𝑖%, 𝑛) when Given A
𝑖

Example:
How much will you have in 40 years if you save
$3,000 each year and your account earns 8%
interest each year?
𝐹 = 𝐴(𝐹 Τ𝐴 , 𝑖%, 𝑛)
𝐹 = $3000 𝐹 Τ𝐴 , 8%, 40 = $3000 259.0565 = $777,170

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Uniform Series Formulas
 E X A M P L E 1. 5

Suppose you make an annual contribution of RM 3,000 to your

savings account at the end of each year for 10 years. If your
savings account earns 7% interest annually, how much can be
withdrawn at the end of 10 years?

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
5
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Finding the present amount from a series of end-
of-period cash flows.

(1 + 𝑖)𝑛 −1 Finding P
𝑃=𝐴 𝑛
= 𝐴(𝑃Τ𝐴 , 𝑖%, 𝑛) when Given A
𝑖(1 + 𝑖)

Example:
How much would it be needed today to provide an
annual amount of $50,000 each year for 20 years, at
9% interest each year?
𝑃 = 𝐴 𝑃Τ𝐴 , 𝑖%, 𝑛
𝑃 = $50,000 𝑃Τ𝐴 , 9%, 20 = $50,000 9.1285 = $456,427

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Finding A when given F.

𝑖 Finding A
𝐴=𝐹 𝑛
= 𝐹(𝐴Τ𝐹 , 𝑖%, 𝑛) when Given F
(1 + 𝑖) −1

Example:
How much would you need to set aside each year for
25 years, at 10% interest, to have accumulated
$1,000,000 at the end of the 25 years?

𝐴 = 𝐹(𝐴Τ𝐹 , 𝑖%, 𝑛)
𝐴 = $1,000,000 𝐴Τ𝐹 , 10%, 25 = $1,000,000 0.0102 = $10,200

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Finding A when given P.
𝑖(1 + 𝑖)𝑛 Finding A
𝐴=𝑃 𝑛
= 𝑃(𝐴Τ𝑃 , 𝑖%, 𝑛)
(1 + 𝑖) −1 when Given P

Example:
If you had $500,000 today in an account
earning 10% each year, how much could you
withdraw each year for 25 years?
𝐴 = 𝑃(𝐴Τ𝑃 , 𝑖%, 𝑛)
𝐴 = $500,000 𝐴Τ𝑃 , 10%, 25 = $500,000 0.1102 = $55,100

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Uniform Series Formulas
 E X A M P L E 1. 6

Biogen company has borrowed RM250,000 to purchase an

equipment for gene splicing. The loan carries an interest rate of 8%
per year and is to be repaid in equal installments over the next 6
years. Compute the amount of this annual installment.
 Cash Flow Diagram
RM 250,000
+ i=8%
- 0 1 2 3 4 5 6

?/year
Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William
copyright @ G. Sullivan, Elin M. Wicks, and C. Patrick Koelling All rights reserved.
mia
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 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Uniform Series Formulas
 Solution Ex 1.6
 Based on Compound Interest Table

A = P (A/P, i, n)
= 250,000 (A/P, 8%, 6)
= 250,000 (0.2163)
= RM 54,075

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William
copyright @ G. Sullivan, Elin M. Wicks, and C. Patrick Koelling All rights reserved.
mia
19
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 EXAMPLE TEST 2
SEM 2 SESI 1314

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 EXAMPLE FINAL EXAM
SEM 1 SESI 20142015

Q3(a) The XYZ Company is planning to increase their

production process by upgrading the machinery to
higher capacity processor with initial cost of RM 86,000,
operation and maintenance cost RM 8,600 per year, life
cycle seven (7) years, salvage value of RM 6,000. Hence
increase in production that will generate an income of
RM 35,000 per year.

Evaluate the investment based on future worth (FW)

method with an expected MARR of 10%per year using a
proper cash flow diagram.
(10 marks)

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 TUTORIAL page 184
Q4.3
Q4.8
Q4.13
Q4.17
Q4.18

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
 THANK YOU

Copyright ©2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.