Chap 7 Eng'g Economy

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GENERAL ENGINEERING & APPLIED SCIENCES
ENGINEERING ECONOMICS
CHAPTER 7
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A cash - flow diagram is a
graphical representation of cash
flows drawn on a time scale.

Arrow Convention:
arrows directed upward
represents positive cash flow
or cash inflow (receipts).
arrows directed downward
represents negative cash flow
or cash outflow (disbursement)
Single Payment Cash Flow

- can occur at the beginning of
the time line ( t 0 = ), at the end of
the time line ( t n = ), or any time
in between.

Uniform Series Cash Flow

- consists of a series of equal
payments A starting at t 1 =
and ending at t n = .

Gradient Series Cash Flow

- starts with a cash flow G at
t 2 = , and increases by G each
year until t n = , at which time the
final cash flow is (n 1)G .

Exponential Gradient Cash
Flow

I. CASH FLOW DIAGRAMS

Uniform Series
t 1 = t n =
Borrowers Viewpoint
Lenders Viewpoint
t n =
Single Payment
Gradient Series
G
2G
3G
4G
5G
6G
(n-1)G
t n = t 2 =
Exponential Gradient
t 1 = t n =
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CHAPTER 7 Engineering Economics
II. SIMPLE INTEREST
Ordinary Simple Interest

I Pin =

Future Worth, F:

F P I or F P(1 in) = + = +

Where:
I = Interest earned

r
i
360
= rate of interest per day
P = Present worth (capital)
F = Future worth
n= Total number of interest periods in days
r = interest in one year
> Note:
For ordinary simple interest, the interest is computed based on one
bankers year.

1banker's year 12 months 360 days
Each month 30 days
= =
=

E Computation for n and i for ordinary simple interest:
Example:
An interest rate of 10% for a period of 9 months:
0.10
i
360
= interest per day
n 9(30) 270 days = =
An interest of 15% for 3 years:

0.15
i
360
= interest per day
( ) ( ) n 3 12 30
1080 days
=
=

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Exact Simple Interest

I Pin =

Future Worth, F:

F P I P(1 in) = + = +

Where:
r
i for ordinary year
365
r
i for a leap year
366
=
=

> Note:
A year is a leap year if it is divisible by 4 and divisible by 400 for a
centennial year. (Centennial years are: 1800, 1900, 2000, etc)

Example:
Determine the exact simple interest on P5,000 for the period from J anuary 1
to March 28, 2006 at 9% interest.

Solution:
Given:

P 5,000
i 9%
=
=

Solving for n:

J anuary 31days
February 28days (leap year)
March 28 days
_________
n 87 days
=

Thus, solving for the interest:

I Pin
0.09
I 5,000 87
365
I P107.26
=

=

=

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III. COMPOUND INTEREST
Future Worth, F:

( )
mt
n r
F P 1 i or F P 1
m

= + = +

O Present Worth, P:

( )
mt
n r
P F 1 i or P F 1
m

= + = +

Where: (for both cases)
F Future worth =
P = Present worth
i = Effective interest rate per interest period (per month, per quarter,
per year, etc)
n= Total number of compounding periods
m= mode of compounding
r = specified nominal rate
t number of years =

In compound interest formula, the quantity:

( )
n
1 i + is known as the Single Payment Compound Amount
Factor (SPCAF).
( )
n
1 i

+ is known as the Single Payment Present Worth
Factor (SPPWF)
Continuous Compounding:

rt
rt
F Pe future worth
P Fe present worth
=
=

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E Values of n and i for different modes of compounding:

- Annually (every 12 months)

m 1 ; i r ; n t = = =

- Semi annually - (every 6 months)

r
m 2 ; i ; n 2t
2
= = =

- Quarterly - (every 3 months)

r
m 4 ; i ; n 4t
4
= = =

- Bimonthly - (every 2 months)

r
m 6 ; i ; n 6t
6
= = =

- Semi-quarterly - (every 1.5 months)
r
m 8 ; i ; n 8t
8
= = =

- Monthly - (every month)

r
m 12; i ; n 12t
12
= = =

- Semi - monthly - (every 0.5 month)

r
m 24 ; i ; n 24t
24
= = =

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IV. RATES OF INTEREST
Nominal Rate of Interest (NRI):
Nominal rate of interest specifies the rate of interest and the number of
interest periods per year.

r im =
Where:
r = nominal rate of interest
i = interest rate per period
m= number of periods

Thus, a nominal rate of interest of 6% compounded monthly simply means
that there are 12 interest periods each year. The rate per interest period
being:

r 6%
i 0.5%
m 12
= = =
> Note:
For compound interest, the rate of interest usually quoted is the NRI. In
order to accurately reflect time - value considerations, NRI must be
converted into ERI before applying the formulas for compound interest.

Effective Rate of Interest (ERI):

m
ERI (1 i) 1 = +
Where:
ER = Effective Rate of Interest
i = interest per interest period

r
m
=
m= number of periods

O Effecti ve Interest Rate for Continuous Compounding:

r
ERI e 1 =
Where:
r = Nominal rate of interest
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O To find the nominal rate when given the effective continuous rate:

( ) r ln 1 i = +
Where:
i = the effective continuous rate

O Equivalent Nominal Rates

For two nominal rates to be equal, their effective rates must be equal.

Example: (Effective interest rate - Continuous compounding)
Calculate the effective interest rate per month for an interest rate of 15%
in a continuously compounded account.

Solution:
The nominal monthly rate, r is:

15
r 1.25%
12
= =

0.0125
i e 1 0.012578
i 1.2578%
= =
=

Example: (Equivalent Rates)
What nominal rate, which if converted quarterly will have the same effect
as 12% compounded semi - annually?

Solution:
Let:
r = the unknown nominal rate

For two nominal rates to have the same effect, their corresponding
effective rates must be equal.

quarterly semi annualy
4 2
4
ERI ERI
r 0.12
1 1 1 1
4 2
r
1 1.1236
4
r 0.11825 or 11.825%
=

+ = +

+ =

=

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V. ESTIMATING DOUBLING AND TRIPLING TIME OF AN INVESTMENT
Doubling Time:
The time required for an initial single amount to double in value with
compound interest is:

log2
n
log(1 i)
=
+

Approximate Formula: (Rule of 72)
The time required for an initial single amount to double in value with
compound interest is approximately equal to:

72
Estimated n
i
=
Where:
i = effective interest in percent

For example, at a rate of 2% per year, it would take 72 2 36 = years for a
current amount to double in size.

Tripling Time:
The time required for an initial single amount to triple in value with
compound interest is:

log3
n
log(1 i)
=
+

. General Formula:
The time required for an initial single amount to become k times in value
is:

logk
n
log(1 i)
=
+

Where:

n
k 2, 3,4,...k =

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VI. DISCOUNT

E Relationship Between Rate of Interest and Rate of Discount

d
i
1 d
=

Where:
i = rate of interest
d= rate of discount

E Successive Discount
Two successive discounts of p% and q% allowed on an item are
equivalent to a single discount of:

pq
d p q %
100

= +

Example:

Two discounts of 15% and 5% are equivalent to what single
discount?

Solution:

( ) ( ) 15 5
d 15 5 %
100
d 19.25%

= +

=

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VII. ANNUITIES
Annuity is a series of equal payments A made at equal intervals of
time.

O Ordinary Annuity
- the type of annuity where the payments are made at the end of
each period

Future Worth of Ordinary Annuity:

( )
n
1 i 1
F A
i

+
=

Present Worth of Ordinary Annuity:

( )
( )
n
n
1 i 1
P A
i 1 i

+
=
+

O Deferred annuity
- is the type of annuity where the first payment is made later than the
first or is made several periods after the beginning of the annuity.

Future Worth of Deferred Annuity:

( )
n
1 i 1
F A
i

+
=

Present Worth of Deferred Annuity:

( )
( )
n
m n
1 i 1
P A
i 1 i
+

+
=
+

Where:
A periodic equal payments =
n number of periods (equal to the number of payments) =
i =interest rate per payment
m number of periods before the beginning of the first payment =
A A A A A A
F
P
0 1 2 3 4 (n 1) n
Cash Flow Diagram
(Ordinary Annuity)
Cash Flow Diagram
(Deferred Annuity)
A A A A A
F
P
0 1 2 m
m n + periods
0 1 2 3 n
n periods
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O Annuity Due
- is the type of annuity where the payment is made at the beginning
of each period

Future Worth of Annuity Due:

( )
n
1 i 1
F A
i

+
=

Present Worth of Annuity Due:

( )
( )
n
n 1
1 i 1
P A
i 1 i

+
=
+

Where: (in both cases)
A periodic equal payments =
n number of periods (equal to the number of payments) =
i =interest rate per payment

O Perpetuity
- is an annuity in which the periodic payments continue indefinitely.

Present Worth of Perpetuity:
( For payments made at the end of each period)

A
P
i
=

Where:
A =periodic payment
i =interest per payment

Cash Flow Diagram
(Annuity Due)
A A A A A A A
F
P
1 2 3 4 5 (n 1) n
n 1 periods
A A A A
P
0 1 2 3. n
Cash Flow Diagram
(Perpetuity)
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VIII. CAPITALIZED COST
Capitalized Cost refers to the present worth of a property that is
assumed to last forever. The capitalized cost of any property is the sum
of the first cost and the present costs of perpetual replacement,
operation and maintenance .

E CASE 1:
No replacement, only maintenance.

A
CC FC
i
= +
Where:
CC Capitalized Cost =
FC = first cost or original cost
A = Annual maintenance cost

E CASE 2:
No maintenance, only replacement.

( )
n
P
CC FC
1 i 1
= +
+

Where:
P = the amount needed to replace the property every n periods

E CASE 3:
Replacement and maintenance every period.

( )
n
A P
CC FC
i
1 i 1
= + +
+

Where:
A = Annual maintenance cost
P = the amount needed to replace the property every n periods
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IX. DEPRECIATION
Depreciation is the decrease in the value of physical property due to
passage of time.

Symbols used and their meaning:

d = annual depreciation charge

n
d = depreciation charge during the nth year

n
D = total depreciation after n years
FC = first cost /original cost
SV = estimated salvage value after L years
L = expected depreciable life of the property
n = number of years before L

E METHODS OF COMPUTING DEPRECIATION

O Straight Line Method
Straight line method of depreciation assumes that the loss in value
of the property is directly proportional to the age of the property.

Annual depreciation:

FC SV
d
L
=

Depreciation after n years:

n
n
FC SV
D n
L
D d n

=

=

Book value after n years:

n n
BV FC D =

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O Sinking Fund Method

Annual depreciation:

( )
( )
L
FC SV i
d
1 i 1
=
+

Depreciation after n years:

( )
n
n
d 1 i 1
D
i

+

=

Book value after n years:

n n
BV FC D =

O Declining Balance Method
Also called as the constant percentage method or the Mateson
Formula:

Depreciation during the nth year:

( ) ( )
n 1
n
d k FC 1 k

=

Salvage Value at the end of its useful life:

( )
L
SV FC 1 k =

Book Value at the end of n years:

( )
n
n
L
BV FC 1 k
SV
BV FC
FC
=

=

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Rate of depreciation:

n
n L
BV SV
k 1 1
FC FC

= =

O Double Declining Balance Method (DDBM)
Also called as the constant percentage method or the Mateson
Formula:

Depreciation during the nth year:

( ) ( )
n 1
n
2 FC 1 k
d
L
=

Salvage Value at the end of its useful life:

L
2
SV FC 1
L

=

Book Value at the end of n years:

n
2
BV FC 1
L

=

Note that the formulas for DDB method are obtained form the formulas for
Declining Balance Method by simply replacing k with 2/L.

O Sum - of - the - Years - Digits (SYD) Method
Depreciation charge during the nth year:

( )
n
L n 1
d FC SV
SYD
+
=

Total depreciation after n years

( )
( )
( )
n
n 2L n 1
D FC SV
2 SYD
+
=

WHERE:
( )
SYD sumof the year's digit
n
SYD n 1
2
=
= +

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TEST - 7

1. It is defined to be the capacity of a commodity to satisfy human want

A. necessity
B. utility
C. luxuries
D. discount

2. It is the stock that has prior right to dividends. It usually does not bring
voting right to the owners and the dividend is fixed and cannot be higher
than the specified amount.

A. Common stock
B. Voting stock
C. Preferred stock
D. Non par value stock

3. It is a amount which a willing buyer will pay to a willing seller for the
property where each has equal advantage and is under no compulsion to
buy or sell.

A. Book value
B. Market value
C. Use value
D. Fair value

4. _________ is the loss of value of the equipment with use over a period
of time. It could mean a difference in value between a new asset and the
use asset currently in a service.

A. Loss
B. Depreciation
C. Extracted
D. Gain

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5. An economic condition in which there are so few suppliers of a particular
product that one suppliers actions significantly affect prices and supply.

A. Oligopoly *
B. monopsony
C. monopoly
D. perfect competition

6. A market whereby there is only one buyer of an item for when there are
no goods substitute.

A. Monopsony
B. Monopoly
C. Oligopoly
D. Oligopsony

7. It is the worth of a property as recorded in the book of an enterprise.

A. Salvage value
B. Price
C. Book value
D. Scrap value

8. Reduction in the level of national income and output usually
accompanied by a fall in the general price level.

A. Devaluation
B. Deflation
C. Inflation
D. Depreciation

9. A formal organization of producers within industry forming a perfect
collusion purposely formed to increase profit and block new comers from
the industry.

A. Cartel
B. Monopoly
C. Corporation
D. Competitors

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10. A market situation where there is only one seller with many buyer.

A. Monopoly*
B. Monophony
C. Oligopoly
D. perfect competition

11. A market situation where there is one seller and one buyer.
A. Bilateral monopoly*
B. Monopoly
C. Oligopoly
D. Bilateral Monopoly

12. Reduction in the level of national income and output usually
accompanied by a fall in the general price level.

A. Deflation
B. Inflation
C. Devaluation
D. Depreciation

13. A series of equal payments made at equal interval of time.

A. Annuity*
B. Amortization
C. Depreciation
D. Bonds

14. The money paid for the use of borrowed capital

A. interest*
B. amortization
C. annuity
D. bonds

15. The place where buyers and sellers come together.

A. Market *
B. Store
C. Bargain center
D. Port

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16. The value of the stock as stated on the stock certificate

A. stock value
B. par value*
C. interest
D. maturity value

17. An market situation in which two competing buyers exert controlling
influence over many sellers.

A. bilateral monopoly
B. oligopoly
C. duopsony*
D. duopoly

18. An market situation in which two powerful groups or organizations
dominate commerce in one business market or commodity.

A. Oligopoly
B. Duopoly*
C. Bilateral oligopoly
D. Bilateral Oligopsony

19. The type of annuity where the first payment is made after several
periods, after the beginning of the payment.

A. Perpetuity
B. Ordinary annuity
C. Annuity due
D. Deferred annuity*

20. The condition in which the total income equals the total operating
expenses.

A. tally
B. par value
C. Check and balance
D. Break even *

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21. The amount which has been spend or capital invested which for some
reasons cannot be retrieved.

A. sunk cost*
B. fixed costs
C. depletion cost
D. construction cost

22. An obligation with no condition attached is called

A. Personal
B. Gratuitous *
C. Concealed
D. Private

23. The sum of all the costs necessary to prepare a construction project for
operation.

A. operation cost
B. construction cost*
C. depletion cost
D. production cost

24. The amount received from the sale of an additional unit of a product.

A. marginal cost
B. marginal revenue*
C. extra profit
D. prime cost

25. The amount that the property would give if sold for junk.

A. junk value
B. salvage value
C. scrap value*
D. book value

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26. The worth of the property which is equal to the original cost less the
amount which has been charged to depreciation.

A. scrap value
B. salvage value
C. book value*
D. market value

27. The sum of the direct labor cost incurred in the factory and the direct
material costs of all materials that go into production is called

A. net cost
B. maintenance cost
C. prime cost*
D. operating cost

28. The difference between the present value and the worth of money at
some time in the future is called

A. market value
B. net value
C. discount*
D. interest

29. The additional cost of producing one more unit is

A. prime cost
B. marginal cost*
C. differential cost
D. sunk cost

30. A written contract by a debtor to pay final redemption value on an
indicated date or maturity date and to pay a certain sum periodically.

A. annuity
B. bond*
C. amortization
D. collateral

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31. Estimated value of the property at the end of the useful life.

A. Market value
B. Fair value
C. Salvage value *
D. Book value

32. Determination of the actual quantity of the materials on hand as of a
given date.

A. physical inventory*
B. counting principle
C. stock assessment
D. periodic material update

33. This consists of cash and account receivable during the next period or
any other material which will be sold.

A. fixed assets
B. deferred charges
C. current asset*
D. liability

34. A wrongful act that causes injury to a person or property and for which
the law allows a claim by the injured party to recover damages.

A. fraud
B. tort*
C. libel
D. scam

35. A series of uniform payment over an infinite period of time

A. depletion
B. capitalized cost
C. perpetuity *
D. inflation

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36. These are products or services that are required to support human life
and activities that will be purchased in somewhat the same quantity
event though the price varies considerably.

A. Commodities
B. Necessities *
C. Demands
D. Luxury

37. The quantity of a certain commodity that is offered for sale at a certain
price at a given place and time.

A. utility
B. supply*
C. stocks
D. goods

38. It is sometimes called the second hand value

A. Scrap value
B. Salvage value*
C. Book value
D. Par value

39. Decreases in the value of a physical property due to the passage of time.

A. Deflation
B. Depletion
C. Declination
D. Depreciation*

40. An association of two or more individuals for the purpose of engaging
business for profit.

A. Single proprietorship
B. Party
C. Corporation
D. Partnership*

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41. The simplest form of business organization wherein the business is own
entirely by one person.

A. partnership
B. proprietorship*
C. corporation
D. joint venture

42. Parties whose consent or signature in a contract is not considered
intelligent.

A. dummy person
B. minors
C. demented persons *
D. convict

43. It is defined as the capacity of a commodity to satisfy human want.

A. satisfaction
B. luxury*
C. necessity
D. utility

44. This occurs in a situation where a commodity or service is supplied by a
number of vendors and there is nothing to prevent additional vendors
entering the market .

A. perfect competition *
B. monophony
C. monopoly
D. cartel

45. These are products or services that are desired by human and will be
purchased if money is available after the required necessities have been
obtained.

A. Commodities
B. Necessities
C. Luxuries *
D. Supplies

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46. Grand total of the assets and operational capability of a corporation.

A. authorized capital*
B. paid off capital
C. subscribed capital
D. investment

47. It is where the original record of a business transaction is recorded.
A. ledger
B. spreadsheet
C. journal*
D. logbook

48. The length of time which the property may be operated at a profit.

A. life span
B. economic life*
C. operating life
D. profitable life

49. The right and privilege granted to an individual or corporation to do
business in a certain region.

A. permit
B. royalty
C. license
D. franchise*

50. The worth of an asset as shown in the accounting records of an
enterprise.

A. fair value
B. par value
C. market value
D. book value*

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1. A man expects to receive P20,000 in 10 years. How much is that money
worth now considering interest at 6 %compounded quarterly?

Solution:

Given:

F 20,000
t 10 yrs
r 6%;compounded quarterly(m 4)
=
=
= =

Formula:
( )
n
F 1 i = +
Where:
r
i , n mt
m
= =
Substitute the given values:

4(10)
.06
20,000 P 1
4
P 11,025.25

= +

=

2. An employee obtained a loan of P10,000 at the rate of 6% compounded
annually in order to repair a house. How much must he pay monthly to
amortize the loan within a period of 10 years?

Solution:
Given:

P 10,000
r 6%
m 1(annually
t 10 yrs
=
=
=
=

Formula: - (Annuity)

( )
( )
n
n
1 i 1
P A
i 1 i

+

=

+

Solved Problems
In Economics

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Solving for the interest rate per month:
( ) ( )
monthly annually
12 1
ERI ERI
1 i 1 1.06 1
i 0.0048675
=
+ =
=

Substitute to the formula:

( )
( )
12(10)
120
1.0048675 1
10,000 A
0.0048675 (1.0048675)
10,000 90.72A
A 110.22

=

=
=

3. What is the effective rate corresponding to 16% compounded daily?
Take 1 year =360 days.

Solution:
Given:
r 16% ; m 360 (daily) = =
Substitute:

360
0.16
ERI 1 1
360
ERI 0.1735
17.35%

= +

=
=

4. What is the accumulated amount after 3 years of P6,500.00 invested at
the rate of 12% per year compounded semi-annually?

Solution:
Given:

P 6,500 ; r 12%
m 2 (semi annually)
t 3 years
= =
=
=

Substitute:

6
0.12
F 6500 1 9,220.37
2

= + =

Formula - (Effective Rate)

( )
m
m
ERI 1 i 1
r
1 1
m
= +

= +

Where:
r nominal rate
m mode of compounding
=
=
Formula - Future worth

( )
n
mt
F P 1 i
r
P 1
m
= +

= +

Where:
r nominal rate
t no. of years
=
=
=
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5. Fifteen percent (15%) when compounded semi-annually will have an
effective rate of

Solution:

Given:

r 15%
m 2
=
=

Substitute:

2
0.15
ERI 1 1
2
ERI 0.1556
15.56%

= +

=
=

6. What rate of interest compounded annually is the same as the rate of
interest of 8% compounded quarterly?

Solution:

Given:

r 8%
m 4
=
=

Let:
x = unknown rate

( )
annually quarterly
4
1
ERI ERI
0.08
1 x 1 1 1
4
x 0.0824
x 8.24%
=

+ = +

=
=

Formula - (Effective Rate)

( )
m
m
ERI 1 i 1
r
1 1
m
= +

= +

Where:
r nominal rate
=
=

> Note:

For two or more rates to be
equivalent, their corresponding
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7. How long will it take the money to triple itself if invested at 10%
compounded semi-annually?

Solution:

Let:
P = present worth
F 3P =


( )
2t
2t
0.10
3P P 1
2
3 1.05
ln3 2t(ln1.05)
t 11.3 years

= +

=
=
=

8. A man wishes his son to receive P500,000.00 ten years from now. What
amount should he invest now if it will earn interest of 12% compounded
annually during the first 5 years and 15% compounded quarterly during
the next 5 years?

Solution:

Given:

F 500,000
r 12%
m 1(annually)
=
=
=

From:
( )
n
F 1 i = +

For the first 5 years:
r 12%; m 1(annually) = =

( )
5
5
5
F P 1.12
F 1.76P
=
=

Formula - Future worth (CI)

( )
n
mt
F P 1 i
r
P 1
m
= +

= +

Where:

r nominal rate
t no. of years
=
=
=

0 5 10
P
5
F
10
F
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For the next 5 years,:

( ) ( )
10
20
10 5
5 20
F 500,000
r 15%; m 4 (quarterly)
0.15
F F 1
4
500,000 1.12 P 1.0375
P 135,868.19
=
= =

= +

=
=

9. What interest rate compounded monthly is equivalent to 10% effective
rate?

Solution:

Given:

r 8%
m 4
=
=

Let:
x = unknown rate

12
12
x
0.10 1 1
12
x
1.10 1
12
x 0.0957
x 9.57%

= +

= +

=
=

Formula - Effective rate

m
r
ER 1 1
m

= +

Where:

r nominal rate
t no. of years
=
=
=

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10. A machine costs P8,000.00 and an estimated life of 10 years with a
salvage value of P500.00. What is its book value after 8 years using
straight-line method?

Solution:

Given:

o
C 8,000 ; n 8 years
L 10 years(life)
SV 500
= =
=
=

Solving for the total depreciation:

n
o
D d n (d annual depreciation)
C SV
n
L
8000 500
8 6000
10
= =

=

= =

Thus, the Book Value (BV) is:

o n
BV C D
8000 6000 2000
=
= =

11. By the condition of a will, the sum of P20,000 is left to a girl to be held in
trust fund by her guardian until it amounts to P50,000. When will the girl
receive the money if the fund is invested at 8% compounded quarterly?

Solution:
Given:

P 20,000 F 50,000
r 8%; m 4 (quarterly)
= =
= =

Substitute given values:

( )
4t
4t
.08
50,000 20,000 1
4
2.5 1.02

= +

=

Take ln both sides:

( ) ln2.5 4t ln1.02
t 11.57 years
=
=

Formula - (Compound Interest)
( )
mt
n r
F P 1 i P 1
m

= + = +

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12. The amount of P12,800 in 4 years at 5% compounded quarterly is

Solution:

Given:

P 12,800
t 4years
r 5%
m 4 (quarterly)
=
=
=
=

Substitute the given values to the formula:

4(4)
0.05
F 12,800 1
4
F 15,614.59

= +

=

13. How much money must you invest today in order to withdraw P2000
annually for 10 years if the interest rate is 9%?

Solution:

Given:

A 2000
t 10 years
r 9%
m 1(annually)
P ?
=
=
=
=
=

Substitute the given values:

( )
10
10
1.09 1
P 2000
0.09(1.09)
P 12,835.32

=

=

( )
mt
n r
F P 1 i P 1
m

= + = +

Formula: - (Annuity)

( )
( )
n
n
1 i 1
P A
i 1 i

+

=

+

Where:
A annual payment/ widrawal
P present worth
n number of payment/ widrawal
=
=
=
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14. Money Borrowed today is to be paid in 6 equal payments at the end of 6
quarters. If the interest is 12% compounded quarterly, how much was
initially borrowed if quarterly payments is P2,000.00?

Solution:

Given:

A 2000
r 12%
m 4 (quarterly)
r 0.12
i 0.03
m 4
=
=
=
= = =

Substitute:

( )
( ) ( )
6
6
1.03 1
P 2000
0.03 1.03
P 10,834.38

=

=

15. The effective rate of 14% compounded semi-annually is

Solution:

Given:

r 14%
m 2 (semi annually)
ER ?
=
=
=

From the formula:

2
0.14
ER 1 1
2
0.1449
14.49%

= +

=
=

Formula: (Present worth -Annuity)

( )
( )
n
n
1 i 1
P A
i 1 i

+

=

+

Where:

A periodic payment
P present worth
n number of payments
r
i interest per period
m
=
=
=
=


m
r
ER 1 1
m

= +

Where:

r nominal rate
t no. of years
=
=
=

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16. A man expects to receive P25,000 in 8 years. How much is that money
worth now considering interest at 8% compounded quarterly?

Solution:

Given:

F 25,000
r 8%
m 4 (quarterly)
t 8 years
P ?
=
=
=
=
=

From the formula:

4(8)
0.08
25,000 P 1
4
P 13,262.83

= +

=

17. What is the accumulated amount of the five-year annuity paying P6,000
at the end of each year with interest at 15% compounded annually?

Solution:

Given:

A 6000
r 15%
m 1(annually)
t 5 years
F ?
=
=
=
=
=

Substitute:

( )
5
1.15 1
F 6000
0.15
F 40,454.29

=

=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
r nominal rate of interest
t no. of years
=
=
=
=
=

Formula: (Future worth -Annuity)

( )
n
1 i 1
F A
i

+

=

Where:

A periodic payment
P present worth
r
m
=
=
=
=

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18. ABC Corporation makes its policy that for every new equipment
purchased, the annual depreciation cost should not exceed 20% of the
first cost at any time without salvage value. Determine the length of
service life necessary if the depreciation used is the SYD method.

Solution :

Using SYD method:

( )
( )
( )
n o L
o o
reversed digit
d C C
SYD
n
0.2C C 0
n
n 1
2
2
0.20
n 1
n 9 years

=

=

+

=
+
=

19. At an interest rate of 10% compounded annually, how much will a
deposit of P1500 in 15 years?

Solution:

Given:

r 10%
m 1(annually)
P 1500
t 15 years
F ?
=
=
=
=
=

From:

mt
r
F P 1
m

= +

Substitute:

( )
15
F 1500 1.10
F 6,265.87
=
=

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20. A debt of P10,000 with 10% interest compounded semi-annually is to be
amortized by semi-annual payments over the next 5 years. The first due
is 6 months. Determine the semi-annual payments.

Solution:

Given:

P 10,000
r 10%
m 2 (semi annually)
r 0.10
i 0.05
m 2
n mt 2(5) 10
A ?
=
=
=
= = =
= = =
=

Substitute:

( )
10
10
1.05 1
10,000 A
0.05(1.05)
A 1,295.05

=

=

21. If you borrowed money from your friend with simple interest of 12%, find
the present worth of P50,000.00 which is due at the end of 7 months.

Solution:
Given:

r 12%
0.12
i
360
F 50,000
n 7(30) 210 days
=
=
=
= =


0.12
50,000 P 1 210
360
P 46,728.97

= +

=


( )
( )
n
n
1 i 1
P A
i 1 i

+

=

+

Where:

A periodic payment
P present worth
r
m
=
=
=
=

Formula: (Ordinary Simple
Interest)

( ) F P 1 in = +
1month 30 days =
Where:

P present worth
i rate of interest/ day
n no. of interest periods
=
=
=

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22. The amount of P50,000.00 was deposited in the bank earning an interest
of 7.5% per annum. Determine the total amount at the end of 5years if
the principal and interest were not withdrawn during the period.

Solution:

Given:

P 50,000
r 7.5%
m 1(per annum)
t 5 years
F ?
=
=
=
=
=

Substitute:

( )
5
F 50,000 1 0.075
F 71,781.47
= +
=

23. What is the corresponding effective rate of 18% compounded semi-
quarterly?

Solution:

Given:

r 18%
m 8 (semi quarterly)
=
=

Substitute:

8
0.18
ER 1 1
8
ER 0.1948
ER 19.48%

= +

=
=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=


m
r
ER 1 1
m

= +

Where:

r nominal rate
t no. of years
=
=
=

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24. A telephone company purchased a microwave radio equipment for P6
million. Freight and installation charges amounted to 4% of the
purchased price. If the equipment will be depreciated over a period of 10
years with a salvage value of 8%, determine the depreciated cost during
the 5
th
year using SYD.

Solution:

o
o
C 6M 0.04(6M)
C 6.24M
= +
=

o
SV 0.08(C )
SV 0.08(6.24M)
SV 499,200
=
=
=

( )
( )
n
SYD n 1
2
10
SYD 10 1 55
2
= +
= + =

Solving for the depreciation during the 5
th
year:

( )
( )
5
5
10 5 1
d 6,240,000 499,200
55
d 626,269.10
+
=
=

25. In how many years is required for P2,000 to increase by P3,000 if
interest at 12% is compounded semi-annually?
Solution:
Given:

P 2000 ; F 5000
r 12% ; m 2 (semi annually)
= =
= =

Substitute:

( )
2t
2t
0.12
5000 2000 1
2
2.5 1.06
ln2.5 2t(ln1.06)
t 7.86 (say 8 years)

= +

=
=
=

Formula :Depreciation (SYD Method)
( )
m
n m 1
d FC SV
SYD
+
=
Where:
F = First Cost
SV = Salvage Value
n= life of the property in years
m= number of years used before n
( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=

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26. A VOM has a current selling price of P400. If its selling price is expected
to decline at a rate of 10% per annum due to obsolence, what will be its
selling price after 5 years?

Solution:

Given:

o
C 400 ; k 10%
m 5 years
= =
=

Substitute:

( )
5
m
m
C 400 1 0.1
C 236.20
=
=

27. Find the nominal rate which if converted quarterly could be used instead
of 12% compounded semi-annually.

Solution:
Given: r 12% ; m 2 (semi annually) = =
Let: x = the unknown nominal rate

x
m 4 = (mode of compounding of x)

Equate Effective rates of interest:

quarterly semi annually
4 2
ER ER
x 0.12
1 1 1 1
4 2
x 0.1183
x 11.83%
=

+ = +

=
=

28. Find the present worth of a future payment of a P100,000 to be made in
10 years with an interest of 12% compounded quarterly.

Solution:
See Formula in Problem 25:

4(10)
0.12
100,000 P 1
4
P 30,655.68

= = +

=

Formula - Matesons Formula
( )
m
m o
C C 1 k =
Where:

m
C = Book Value at the
end of m years
k = rate of depreciation

o
C = first cost
> Note:
For two or more rates
to be equivalent, their
corresponding effective
rates must be equal.
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29. What nominal rate, compounded semi-annually, yields the same amount
as 16% compounded quarterly?

Solution:

Given:

r 16%
m 4 (quarterly)
=
=

Let:
x = the unknown nominal rate

x
m = (mode of compounding of x)


semi annually quarterly
2 4
ER ER
x 0.16
1 1 1 1
2 4
x 0.1632
x 16.32%
=

+ = +

=
=

30. What rate of interest compounded annually is the same as the rate of
interest of 8% compounded quarterly?

Solution:


( )
annually quarterly
4
ER ER
0.08
1 x 1 1 1
4
x 0.0824
x 8.24%
=

+ = +

=
=

> Note:
For two or more rates to be
equivalent, their corresponding
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31. You loan from a loan firm an amount of P100,000 with the rate of simple
interest of 20%, but interest was deducted from the loan at the time the
money was borrowed. If at the end of one year you have to pay the full
amount of P100,000, what is the actual rate of interest?

Solution:

Given:

n 1year =
P 100,000 20% = advance interest

P 100,000 0.20(100,000)
P 80,000
F 100,000 (to be paid at the end of 1year)
=
=
=

From:
( ) F P 1 in = +
Substitute:

[ ] 100,000 80,000 1 i(1)
i 0.25
i 25%
= +
=
=

Alternate Solution:

Think of the 20% advance interest as a rate of discount:
Relationship between rate of interest i and rate of discount d:

d
i
1 d
=

Then,

0.20
i
1 0.20
i 0.25
i 25%
=
=
=

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32. A loan of P5,000 is made for a period of 15 months at a simple interest
rate of 15%. What future amount is due at the end of a loan period?

Solution:

Given:

P 5000
n 15(30) 450days
0.15
i
360
=
= =
=

Substitute:

0.15
F 5000 1 450
360
F 5,937.5

= +

=

33. Mr. J . Reyes borrowed money from a bank. He received from the bank
P1,842 and promise to repay P2,000 at the end of 10 months. Determine
the simple interest.

Solution:

Given:

( )
P 1842
F 2000
n 10 30 300days
i ?
=
=
= =
=

See formula in problem 32:

i
2000 1842 1 300
360
i 0.1029
i 10.29%

= +

=
=

Interest)

( ) F P 1 in = +
1month 30 days =
Where:

P present worth
=
=
=

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34. What is the effective rate corresponding to 18% compounded daily?
Take 1 year is equal to 360 days.

Solution:

Given:

r 18%
m 360 (daily)
=
=

Substitute:

360
0.18
ER 1 1
360
ER 0.1972
ER 19.72%

= +

=
=

35. Find the annual payment to extinguish a debt of P 10,000 payable for 6
years at 12% interest annually.

Solution:

Given:

P 10,000
t 6 years
r 12%
m 1(annually)
n mt (1)(6) 6
r 0.12
i 0.12
m 1
=
=
=
=
= = =
= = =

Substitute:

( )
( )
6
6
1 0.12 1
10,000 A
0.12 1 0.12
A 2,432.257

+
=

+

=


m
r
ER 1 1
m

= +

Where:

r nominal rate
t no. of years
=
=
=


( )
( )
n
n
1 i 1
P A
i 1 i

+

=

+

Where:

A periodic payment
P present worth
r
m
=
=
=
=

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36. What annuity is required over 12 years to equate with a future amount of
P 20,000? Assume i 6% = annually.

Solution:

Given:

F 20,000
t 12 years
r 6%
m 1(annually)
r 0.06
i 0.06
m 1
n mt 12
A ?
=
=
=
=
= = =
= =
=

Substitute:

( )
12
1 0.06 1
20,000 A
0.06
A 1,185.54

+
=

=

37. Find the present worth of a future payment of 80,000 to be made in six
years with an interest of 12% compounded annually.

Solution:

Given:

F 80,000
t 6 years
r 12%
m 1(annually)
P ?
=
=
=
=
=

Substitute:

( )
6
80,000 P 1 0.12
P 40,530.48
= +
=


( )
n
1 i 1
F A
i

+

=

Where:

A periodic payment
F Future worth
r
m
=
=
=
=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=

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38. The amount of P 20,000 was deposited in a bank earning an interest of
6.5% per annum. Determine the total amount at the end of 7 years if the
principal and interest were not withdrawn during this period.

Solution:

Given:

P 20,000
r 6.5%
m 1(per annum)
t 7 years
F ?
=
=
=
=
=

Substitute:

( )
7
F 20,000 1 0.065
F 31,079.7
= +
=

39. Today a businessman borrowed money to be paid in 10 equal payments
for 10 quarters. If the interest rate is 10% compounded quarterly and the
quarterly payment is 2,000 pesos, how much did he borrowed?

Solution:
Given:

r 10%
m 4 (quarterly)
r 0.10
i 0.025
m 4
n 10 equal payments
A 2000
P ?
=
=
= = =
=
=
=

Substitute:

( )
( )
10
10
1 0.025 1
P 2000
0.025 1 0.025
P 17,504.13

+
=

+

=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=


( )
( )
n
n
1 i 1
P A
i 1 i

+

=

+

Where:

A periodic payment
P present worth
r
m
=
=
=
=

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40. What is the present worth of a P 500 annuity starting at the end of the
third year and continuing to the end of fourth year, if the annual interest
rate is 10%.

Solution:

Given:

A 500
m 2
n 2
r 10%(annually)
=
=
=
=

Substitute:

( )
( )
2
2 2
1 0.10 1
P 500
0.10 1 0.10
P 717.16
+

+
=
+

=

Alternate Solution:

( )
( )
( )
1 n
1 3
2 4
F
P
1 i
500
P 375.66
1.10
500
P 341.51
1.10
P 375.66 341.51
717.17
=
+
= =
= =
= +
=

Formula:
(Present worth of deferred Annuity)

( )
( )
n
m n
1 i 1
P A
i 1 i
+

+
=
+

Where:

A periodic payment
P present worth
m=number of periods before
the beginning of the first
payment
=
=
=

0 1 2 3 4
500 500
1
P
2
P
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41. A copying machine has a useful life of 3 years and a salvage value of P
20,000 was bought for P 135,000. If the owner decides to sell after using
it for 2 years, how much should the selling price be so that he will not
lose or gain if the interest is 5%. (Hint: apply the Sinking Fund method).

Solution:

Selling Price =Book Value after n years

From Sinking Fund Formula:

( )
( )
o
L
C SV
d
1 i 1
=
+
annual depreciation cost
Where:
d= annual depreciation cost

o
C = first cost or original cost
SV = salvage value at the end of useful life
L = life

Solving for d:

( ) ( )
( )
3
135,000 20,000 0.05
d
1.05 1
d 36,479
=

Total depreciation at the end of 2 years:

( )
( )
n
2
2
2
2
1 i 1
D d
i
1.05 1
D 36,479
0.05
D 74,782

+
=

=

=

Solving for the Book Value after 2 years:

2 o 2
BV C D
135,000 74,782
60,218 selling price
=
=
=

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42. A loan for P 50,000 is to be paid in 3 years at the amount of P65, 000.
What is the effective rate of money?

Solution:

Given:

P 50,000
F 65,000
n 3 years
=
=
=

From:

I Pin
65,000 50,000 50,000i(3)
i 0.10
i 10%
=
=
=
=

43. Today an investor withdraws P50,000.00 representing the accrued
amount of his investment that matured. If he invested at 10%
compounded semi-annually for 10 years, how much did he invest in
pesos?

Solution:

Given:

F 50,000
r 10%
m 2 (semi annually)
t 10 years
=
=
=
=

Substitute:

2(10)
0.10
50,000 P 1
2
P 18,844.47

= +

=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=

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44. A man invested part of P 20,000 at 18% and the rest at 16%. The annual
income from 16% investment was P 620 less than three times the annual
income from 18% investment. How much did he invest at 18%?

Solution:

Let:
x = amount invested at 18% interest
20,000 x = the amount invested at 16% interest
Then,

( ) ( ) 0.16 20,000 x 3 0.18x 620
3200 0.16x 0.54x 620
x 5,457.14
=
=
=

45. What is the accumulated amount after three (3) years of P 6,500
invested at the rate of 12% per year compounded semi-annually?

Solution:

Given:

P 6,500
t 3 years
r 12%
m 2 (semi annually)
F ?
=
=
=
=
=

Substitute:

2(3)
0.12
F 6,500 1
2
F 9220.37

= +

=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=

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46. If the authorize capital stock of corporation is P 2,000,000 how much
must the paid-up capital be?

Solution:

Formula:

Authorized Capital Stock 16(Paid upCapital) =

Hence,

2,000,000
Paid up Capital
16
125,000
=
=

47. In how many years will the amount of P 10,000 triple if invested at an
interest rate of 10% compounded per year?

Solution:

Given:

P 10,000
F 3P 30000
r 10%
m 1(per year)
t ?
=
= =
=
=
=

Substitute:

( )
( )
( )
t
t
30,000 10,000 1 0.10
3 1.10
ln3 t ln1.10 taking ln both sides
t 11.53
= +
=
=
=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=

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48. What is the amount of an annuity of P5000 per year at the end of each
year for 7 years at 5% interest compounded annually?

Solution:

( ) ( )
n 7
1 i 1 1 0.05 1
F A 5000
i 0.05
F 40,710

+ +
= =

=

50. What is the book value of an equipment purchased three years ago for
P15,000 if it is depreciated using the sum of the years digit method? The
expected life is 5 years.

Solution:

( ) ( ) ( )
( )
( )
( )
( )
1 o n
1
2
3
n
Using SYD method:
n n 1 5 6
year 15
2 2
n
d C C
year
5
d 15,000 0 5000
15
4
d 15,000 0 4000
15
3
d 15,000 0 3000
15
Total depreciation:
D 5000 4000 3000
12,000
Book Value 15,000 12,000
Book Value 3,000
+
= = =

=

= =
= =
= =
= + +
=
=
=

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51. The parents planned for their son to receive P50,000 ten years from
now. What amount in pesos should they invest now if it will earn interest
of 12% compounded annually for the first five years and 15%
compounded quarterly during the next five years?

Solution:

For the first 5 years:

( )
( )
5
5
5
5
F P 1 0.12
F 1.12 P
= +
=

For the next 5 years:
( )
mt
10 5
4(5)
5
r
F F 1
m
0.15
50,000 1.12 P 1
4
P 13,586.82

= +

= +

=

52. A customer buys an electric fan from a store that charges P1,500 at the
end of 90 days. The customer wishes to pay cash. What is the cash
price if the money is worth 10% simple interest?

Solution:

F 1,500
i 10%
P ?
=
=
=

0.10
1500 P 1 90
360
P 1,463.41

= +

=

10
F 50,000 =
5
5
F
P
10 0
Interest)
( ) F P 1 in = +
1month 30 days =
Where:

P present worth
=
=
=

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53. In how many years will P1000 double if interest is 10% compounded
quarterly?

Solution:

Given:

P 1000
F 2P 2000
r 10%
m 4 (quarterly)
t ?
=
= =
=
=
=

Substitute:

( )
4t
4t
0.10
2000 1000 1
4
2 1.025
ln2 4t(ln1.025)
t 7 years

= +

=
=
=

54. Mr. Reyes borrowed money from a bank. He received from the bank
P1842 and promised to pay P2,000 at the end of 10 months. Determine
the simple interest rate.

Solution:

Given:

P 1842
F 2000
n 10(30) 300 days
=
=
= =

Substitute:

( )
i
2000 1842 1 300
360
i 0.1029
i 10.29%

= +

=
=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=

Interest)
( ) F P 1 in = +
1month 30 days =
Where:

P present worth
=
=
=

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55. A man borrows P15,000 from Hong Kong Bank. The rate of simple
interest is 12%, but the interest is to be deducted from the loan at the
time the money is borrowed. At the end of one year he has to pay back
P15,000. What is the actual rate of interest?

Solution:

Given:

P 15,000 12%(15,000)
P 13,200
F 15,000
n 360 days
=
=
=
=

Substitute:

i
15,000 13,200 1 360
360
i 0.1364
i 13.64%

= +

=
=

56. In how many years will it take money to quadruple if invested at 8%
compounded semi-annually?

Solution:

Let:
P = present worth

F 3P (quadruple)
r 8%; m 2 (semi annually)
=
= =

Substitute:

( )
2t
2t
0.08
4P P 1
2
4 1.04
ln4 2t(ln1.04)
t 17.67 years

= +

=
=
=

Interest)
( ) F P 1 in = +
1month 30 days =
Where:

P present worth
=
=
=

( )
mt
n r
F P 1 i P 1
m

= + = +

Where;
F future worth
P present worth
t no. of years
=
=
=
=
=

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57. A brand new machine is estimated to have a salvage value of P 10,000
after ten years and a book value of P 30,000 after 5 years, what is the
initial cost of the machine? (Assume straight line depreciation).

Solution:
Given:

SV 10,000
BV 30,000
L 10 years
n 5 years
=
=
=
=

Substitute:

( )
o
o
o
o
o
o
o
o
C SV
BV C n
L
C 10,000
30,000 C 5
10
C
30,000 C 5,000
2
C
25,000
2
C 50,000

=

=

= +
=
=

58. A machine was brought for P 50,000 with an estimated useful life of 10
years and a salvage value of P 5,000. What is its annual depreciation
assuming straight line trend?

Solution:

Substitute:

50,000 5,000
d
10
d 4,500
=
=

Formula: Depreciation (Straight Line
Method)-Book Value

o
o n n
C SV
BV C D ; D n
L

= =

Where:

o
n
BV Book Value
SV Salvage Value
C first cost
D total depreciation after n years
L life
n no. of years before L
=
=
=
=
=
=
Formula: Depreciation (Straight Line
Method)-Book Value

o
C SV
d
L
=
Where:

o
d annual depreciation
SV Salvage Value
C first cost
L life
=
=
=
=

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59. What annuity is required over 10 years to equate with a future amount of
P20,000. Assume i =8% per year.

Solution:

Given:

F 20,000
r 8%
m 1
A ?
=
=
=
=

Substitute:

( )
10
1 .08 1
20,000 A
0.08
A 1,380.59

+
=

=

60. A merchant loaned P 500,000 payable in 10 years at an interest rate of
12 percent compounded annually. What is the monthly amortization for
10 years?

Solution:

Solving for the interest per month:

( ) ( )
( )
( ) ( )
12 1
120
120
1 i 1 1.12 1
i 0.009489 or 0.9489%
A 1.009489 1
500,000
0.009489 1.009489
A 6997.43
+ =
=

=
=


( )
n
1 i 1
F A
i

+

=

Where:

A periodic payment
F Future worth
=
=
=

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61. 10 years ago a businessman purchased a machine for P50,000 with an
expected life of 20 years based on a straight line depreciation. Today,
he decided to replace it with a modern one that costs P120,000. If the
salvage value of the old unit is P20,000, how much more will he raise to
buy the new machine?

Solution:

Given:

o
C 50,000
SV 20,000
L 20
n 10
=
=
=
=

Let: x = amount needed to buy the new equipment

Solving for the Book Value:

( )
( )
o
o
C SV
BV C n
L
50,000 20,000
BV 50,000 10
20
BV 45,000

=

=

=

Solving for x:

o
x C BV
x 120,000 45,000
x 75,000
=
=
=

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62. A heavy duty copying machine was procured for P100, 000 with an
estimated salvage value of P10, 000 after 10 years. What is the book
value after 5 years? (Assume straight line depreciation).

Solution:

Given:

o
C 100,000
SV 10,000
L 10 years
n 5 years
=
=
=
=

Substitute:

( )
( )
o
5 o
5
5
C SV
BV C n
L
100,000 10,000
BV 100,000 5
10
BV 55,000

=

=

=

63. Based on its purchased price a machine is expected to depreciate at a
uniform rate of 18 percent annually until it has zero salvage value.
Approximate the useful life of the machine in years using the SYD
method?

Solution:

Given:

( )
( )
0 o
o 0
n
0.18C C 0
n
n 1
2
2
0.18C C
n 1
0.18n 0.18 2
n 10

=

+

=
+
+ =
=

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64. A man deposited P5, 000 on the date his son celebrated his 1
st
birthday.
If the money is worth 10% compounded semi-annually, what is the
maximum amount the son can withdraw on his 21
st
birthday?

Solution:

P 5000
t 20 years
r 10%, semi annually
=
=
=

Solving for the future worth, F:

( )
n
2(20)
F P 1 i
0.10
F 5000 1
2
F P35,200
= +

= +

=

65. What will be the value of P 6,000 four and one-half years from now if
invested at 15% compounded quarterly?

Solution:

P 6,000
r 15%, quarterly
t 4.5 years
F ?
=
=
=
=

Solving for F:

4.5(4)
0.15
F 6000 1
4
F P11,640

= +

=

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