Exam 2 Flashcards
(25 cards)
annuity
all receipts and disbursements of a period summed up, calculated for the end of year period, uniform cashflow
What is uniform series compound amount factor used for
used to determine future amount equivalent to a cash flow
What is a uniform series sinking fund factor
a separate account into which someone deposits an annuity in order to have a specified amount of money available in the future, for example, saving for college
Define uniform series capitol recovery factor
how large the annual return (A) msut be to recover an investment P at t=0
Define uniform series present worth factor
determines the present value of n future annuity payments at a given interest rate i
assumptions for present worth analysis
end of year convention, sunk costs disregarded, money is obtained from a bank at interest rate i, inflation, deflation, taxes are disregarded
endowment time period?
Infinity
What equation do you use for investments in a cash flow
Capitol recovery factor
What equation do you use for salvage in a cash flow?
Sinking fund factor
Equivalent Uniform Annual Worth (EUAW)
EUABenefits - EUACost
Equation for cash flow given I, R, E, S, n, i
A= -AI + As + (R-E)
Define Internal rate of return (IRR)
the interest rate at which the present worth and the equivalent annual worth equal to zero
IRR application
used to determine the yield of an investment
IRR equation
sum Fx/(1+i)^n
IRR getting closer to zero
increase percentage
endowment equation
A= endowment times interest rate
The present worth of a cash flow over ten years has a value of $0 at an interest rate of 5%. How do you interpret the result?
The cash flow earns exactly 5%.
Define the net present worth (NPW).
NPW = PW of benefits - PW of cost
What are the three biggest problems in present worth analysis looking at buildings?
Determining the (future) cash flow, the (future) interest rate, and the useful life of the building.
What is the goal of an annual cash flow analysis?
To convert money into an equivalent uniform annual cost (EUAC) or benefit (EUAB).
What do you do when using a sinking fund factor?
Find the equivalent uniform annual cash flow for a future monetary value.
What do you do when using a capitol recovery factor?
Find the equivalent uniform annual cash flow for a present monetary value.
What information do you get from a present worth analysis
The monetary value of a cash flow given an interest rate.
What information do you get from an EUAW analysis
the monetary value of annual cash flows.
