Lecture 2 Notes: Positive Economic Developments
Economic analysis. Is it worthwhile to switch from gas to solar heat
for the hot water this home requires? In order to answer this question we
must compare the cost of the two alternatives.
For the solar hot
Lecture 4 Notes: Minimum Delivery Costs
Minimum delivered price of natural gas ($/MCF) above which residential solar hot
water heating is economical, assuming 50% tax credit
Threshold price of gas, p* ($/MCF)
Loan interest rate
Annual capital
Boston
Tucso
Lecture 6 Notes: Developing Worth Factors
Alternatively, we can use the factors we have already developed, by observing
that P is both the present value of the annuity itself but also the present value of
the future worth of the annuity, which we have alr
Lecture 3 Notes: Substitution Interest Rate Payments
After the end of the first year, the homeowner pays interest at rate r on
the principal, rP, and retires a portion of the principal, D1, where
A = Pr + D1
(1)
After the end of the second year, the homeo
Lecture 2 Notes: Economic Analysis
Economic analysis. Is it worthwhile to switch from gas to solar heat for
the hot water this home requires? In order to answer this question we must
compare the cost of the two alternatives.
For the solar hot water heatin
Lecture 3 Notes: Capital Change Rate
After the end of the first year, the homeowner pays interest at rate r on the
principal, rP, and retires a portion of the principal, D1, where
A = Pr + D1
(1)
After the end of the second year, the homeowner pays intere
Lecture 4 Notes: Fraction of Profits
Minimum delivered price of natural gas ($/MCF) above which residential solar hot
water heating is economical, assuming 50% tax credit
Threshold price of gas, p* ($/MCF)
Boston
Tucson
Loan interest rate
Annual capital
r
Lecture 6 Notes: Present and Future Capital Recovery
Alternatively, we can use the factors we have already developed, by observing
that P is both the present value of the annuity itself but also the present value of
the future worth of the annuity, which
Lecture 1 Notes: Intro to Course
To motivate the discussion, we consider a homeowner faced with a decision
whether to install a solar hot water heater to replace an existing natural gas fired
hot water heater.
First, we must design the solar heating syste
Lecture 5 Notes: Future Worth
Translating a cash flow to an equivalent amount at some future date is called
finding the future worth. The equivalent amount of a future cash flow today is
called the present worth.
The algebraic factors - time value factors
Lecture 7 Notes: Erosion Purchasing Power
In the discussion so far we have only paid glancing attention to inflation. We have, of
course, paid much more attention to the fact that the worth of any given cash flow
depends on when it occurs in time, but tha
Lecture 8 Notes: Market Expectations
Now if there is no inflation, I will be happy if, at the end of the year, I get back the
$1000, along with a $50 interest payment.
But suppose there is inflation of 50%/year. Then if I am to preserve the purchasing
pow
Lecture 10 Notes: Alternative Overnight Costs
The future worth of the project at the construction completion date. This is the
amount of money that, if paid to the constructor at the completion of the project,
would be just sufficient to cover all costs i
Lecture 9 Notes: Plant Capital Cost
n
n
F(1 i) F(1 i)
n
n
F(1 f ) (1 i)
So
i i f i f
or,
i
if
1 f
We next use these ideas to estimate the construction cost of a power plant.
5. Calculation of plant capital cost including escalation and interest
during co