PreLecture_L2.3__19SEP2018_ARH.pdf - L2.3 Equivalence for Repeated Cash Flows Angela Harris CE250 Model 2 Engineering Economics 19 September 2018 1 Cash

PreLecture_L2.3__19SEP2018_ARH.pdf - L2.3 Equivalence for...

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L2.3- Equivalence for Repeated Cash Flows Angela Harris CE250 Model 2: Engineering Economics 19 September 2018 1
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Cash Flow Diagram Problem 2 1 2 3 4 i =15% 1000 F 0 1000 1000
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Continuous Compounding Example If you were to deposit $2000 in a bank that pays 5% nominal interest, compounded continuously, how much would be in the account at the end 2 years?
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Continuous Compounding Example How long will it take for money to double at 10% nominal interest, compounded continuously? 4
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Cash Flow Diagram Problem 5 1 2 3 4 i =15% 1000 F 0 1000 1000
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Exercise 4-8 A firm spends $500,000 annually for a required safety inspection program A new monitoring technology would eliminate this cost How much can the firm afford to spend today on this new technology? The firm wants to recover its investment in 15 years Interest rate: 10%
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Exercise 4-9 A city engineer knows that she will need $25M in 3 years to replace toll booths on a toll road Traffic on the road is 3M vehicles per year
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