Annuity present worth factor

In effec t, in computing the average net annual cash flow per dollar invested, the value of f p of Eq. (9-46) has been obtained for this example. From tables of the annuity present-worth factor/ p the value of the interest rate is found to be = 0.25 when f p = 0.5124 with n = 3 years. 

Annuity present-worth factor, fAFi 1 + 0" Dimensionless R° Re... 

The value of / will for most cases be less than 0.2 and with the right application may well be less than 0.1. Values for the annuity present-worth factor will in most cases be less than 0.15. 

Note that in this example the present worth factor of the annuity is the reciprocal of the interest rate. 

Present worth of an annuity, 228 definition of 225-226 factors for, 223n., 236-237 method for determining depreciation, 285... 

In this chapter, PBP (= FCECF) did not consider the time value of money. In order to factor in the time value of money, future CFs have to be brought to the current value using the present worth annuity factor,/pA(r[Pg.336]

Early in this section, only two sums of money were considered, one at the beginning, called present worth, P, and one at the end, called future worth, F. One of these was referred to as the single payment. The two were related by equations involving the interest rate/period and the number of periods that interest was applied. The use of compound interest to determine sums earlier in time (e.g., present worth) that are equivalent to a later, larger sum (e.g., future worth) was referred to as discounting. Factors such as 1/(1 + /)" are called discount factors. The concepts in the previous section can be extended to a veiy common situation, called the annuity, where instead of a single payment, a series of equal payments is made at equal time intervals. Annuities also involve discounting and discount factors. 

Annuity equations relating F and the periodic payments. A, are converted to equations relating P to A by combining them with Eq. (17.12) for discrete interest or Eq. (17.20) for continuous interest. This is often referred to as discounting the amount of the annuity to determine its present worth. In Table 17.7, under periodic interest, the discrete uniform-series sinking-fund deposit factor becomes the discrete uniform-series capital-recovery facte in the following manner ... 

Discount factors represent sinple ratios and can be multiplied or divided by each other to give additional discount factors. For exanple, assume that we need to know the present worth, P, of an aimuity, A—that is, the discount factor for P/A— but do not have the needed equatiom The only available formula containing the annuity term. A, is the one for F/A derived above. We can eliminate the future value, F, and introduce the present value, P, by multiplying by the ratio of P/F, from Equation 9.6. 

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