Engineering%20Economics_CH4_PartII

Engineering%20Economics_CH4_PartII - Engineering Economics...

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Engineering Economics Ch. 4 Money-Time Relationship and Equivalence - Part II -
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Deferred Annuity All annuities discussed involve the first cash flow being made at the end of the first period ( Ordinary Annuity ). If the cash flow does not begin until some later date, the annuity is known as a deferred annuity . 0 1 2 3 ………. . A A A A N 0 1 2 3 ………. . A A A A N ………. . J+1 J+2 J+3 J The annuity deferred for J periods
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Deferred Annuity F = A (F/A, i , N-J) P = [A (P/A, i, N-J)] (P/F, i, J) = A (P/A, i, N-J) (P/F, i, J) 0 1 2 3 ………. . A A A A N ………. . J+1 J+2 J+3 J
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Deferred Annuity Example 4-14 : Suppose that a father, on the day his son is born, wishes to determine what lump amount would have to be paid into an account bearing interest of 12% per year to provide withdrawals of $2,000 on each of the son’s 18 th , 19 th , 20 th , and 21 st birthdays . – Drawing CFD will be very helpful Example 4-15: You put $5000 per year into 401(k) plan with I = 8%, and move to another job and start a new 401 (k) plan. If the first continued for 35 years after you stopped making contributions. F 40 = ?
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There are diverse ways of computing present value from the above cash flow. Assume
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Engineering%20Economics_CH4_PartII - Engineering Economics...

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