Engineering Economic Analysis

102 MORE INTERESTFORMULAS

Note that the value ofnin the gradient factor is 5, not 4. In deriving the gradient factor, we had

(n- 1) terms containing G. Here there are four terms containing G.

Thus,(n- 1)=4, son= 5.

P=120(P j A, 5%, 5) +30(P jG, 5%" 5)

= 120(4.329) + 30(8.237)

=519+247

=$766

He ~houlddeposit $766 in the bank now.

,."'-.."" =..-.~

On a certain piece of machinery, it is estimated that the maintenance expense will be as follows:

Year

1

2

3

4

Maintenance

$100

200

300

400

What is the equivalent uniform annual maintenance cost for the machinery if 6% interest is

used?

SOLUTION

400

It T r [

0-1-2-3-4

!!!!

= Ao AA A,

" I

The first cash flow in the arithmetic gradient series is zero, hence the diagram isnotin proper

fOffilJorthe arithmeticgradientequation. Asin.Example 4-8, the cash flpwmust be resolved into

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