LE2 Flashcards
A series of uniform payments made at equal intervals of time.
Annuity
The payment is made at the end of each period starting from the first period.
Ordinary Annuity
The payment is made at the beginning of each period starting from the first period.
Annuity Due
The first payment is made several periods after beginning of annuity.
Deferred Annuity
It is annuity where payment periods extend forever or periodic payment continue indefinitely.
Perpetuity
The equal payment are made at the end of each compounding period starting from the first compounding period.
Ordinary Annuity
What is the formula to get the FUTURE WORTH of an Ordinary Annuity?
F = A [ ( 1 + i ) ^n – 1 / i ]
What is the formula to get the PRESENT WORTH of an Ordinary Annuity?
P = A [ ( 1 + i ) ^n – 1 / i ( 1 + i ) ^n ]
It is the formula for Geometric Progression
S = A ( 1 - r ^n ) / 1 - r
It is like a regular annuity, except the first payment is delayed by a certain number of compounding periods.
Deferred Annuity
What is the formula to get the PRESENT WORTH of a Deferred Annuity?
P = A [ ( 1 + i ) ^n – 1 / i ( 1 + i ) ^( n + k ) ]
What is the formula to get the FUTURE WORTH of a Deferred Annuity?
F = A [ ( 1 + i ) ^n / i ]
An application of perpetuity.
Capitalized Cost
The _________ of a project, structure, or machine is the sum of the First Cost (FC), and the present worth of all future payments and replacements which is assumed to continue for a long time or forever.
Capitalized Cost
What is the formula for Capitalized Cost?
C = FC + ( OM / i ) + ( RC – SV ) / ( 1 + i ) ^n – 1
where:
C = Capitalized Cost
FC = First Cost
OM = Annual Operation and Maintenance Cost
RC = Replacement Cost
SV = Salvage Value or Salvage Cost
What is the formula of Annual Cost?
AC = Ci
AC = FCi + OM + [ ( RC – SV ) i ] / ( 1 + I ) ^n – 1
The equal payments are made at the beginning of each compounding period starting from the first period.
Annuity Due
What is the formula to get the FUTURE WORTH of an Annuity Due?
F = A [ (( 1 + i ) ^n - 1 ) / i ] ( 1+ i )
What is the formula to get the PRESENT WORTH of an Annuity Due?
P = A [ (( 1 + i ) ^n - 1 ) / i ( 1 + i ) ] ( 1+ i )
In _________, we are going to calculate and examine the margin of safety for the revenue and cost.
Break - even Analysis
It is the point where the revenue equals the cost.
Break - even Analysis
At ________, the company is neither gaining nor losing profit.
Break - even Analysis
What is the formula for Total Revenue?
TOTAL REVENUE = TOTAL COST
Total Revenue = Total Cost
What is the formula to get the Profit?
Profit = Total Revenue – Total Cost
What is the formula to get the Total Cost?
Total Cost = Variable Costs + Fixed Costs
These are the cost of producing a product that varies proportional to the quantity or production.
Variable Costs
These are the cost that must be paid regardless of the quantity produced.
Fixed Costs
If the profit is positive, then the company is _________.
Gaining Profit
If the profit is _________, then the company is gaining profit.
Positive
If the profit is negative, then the company is _________.
Losing Profit
If the profit is _________, then the company is losing profit.
Negative
If the profit is zero, then the company is at _________.
Break-even
If the profit is _________, then the company is at break-even.
Zero
It states the “How many sales it takes for the cost of doing business.”
Break-even Analysis
