ECON 1

Topics: Formulas:
Simple Interest SIMPLE INTEREST EFFECTIVE RATE OF INTEREST GRADIENT SERIES ✴
Compound Interest 𝐼 = 𝑃𝑟𝑛 𝑚 𝑥𝑛
Annuity
𝐹 = 𝑃(1 + 𝑟𝑛) 𝐸𝑅 = 1 +( 𝑟
𝑚 ) −1
𝑃 =∑
𝑓(𝑥)
𝐹−𝑃 ○ Continuous Compounding: 𝑥
Gradient Series ✴ 𝑟= 𝑃 𝑟 𝑥𝑖 (1+𝑖)
𝐸𝑅 = 𝑒 − 1
𝐹−𝑃 ○ Arithmetic:
𝑟𝑑 = 𝐹 ○ Equivalent Rates:
𝐸𝑅1 = 𝐸𝑅2 𝑓(𝑥) = 𝐴 + 𝐵𝑥
+ LEAP YEAR
– divisible by 4 ○ Geometric:
ANNUITY 𝑥
– divisible by 4, 100, and 400 𝑛 𝑓(𝑥) = 𝐴𝐵
(1+𝑖) −1
+ APJUNSEN 𝐹 = 𝐴⎡⎢ 𝑖
⎤
⎥ ✴ Sample CalTech for Geometric:
– 30 days ⎣ ⎦ 1. Mode → Stat → ABexp
○ Perpetuity: 2. x = 1, 2 → y = 1500, 1600
COMPOUND INTEREST
𝐴
○ General Formula: 𝑃= 3. CA → Apps → Reg → A → =
𝑖
𝑏−𝑎 4. Shift-STO → A
𝐹𝑏 = 𝐹𝑎(1 + 𝑖) + SINKING FUND FACTOR
5. Apps → Reg → B → =
−1
○ Other Formulas: (1+𝑖) −1
𝑛'
6. Shift-STO → B → CA
𝑆𝐹 = ⎡⎢ ⎤
⎥
𝐹 = 𝑃(1 + 𝑖)
𝑛
⎣ 𝑖 ⎦ 7. Mode → Comp → Apps → ∑
−𝑛 (remove -1 for FW factor) 4 𝑥
𝑃 = 𝐹(1 + 𝑖) 𝐴𝐵
+ CAPITAL RECOVERY FACTOR 8. ∑ = 5711
○ Continuous Compounding: 𝑥

𝑛' −1 𝑥=1 (1+8%)

𝑟𝑡
𝐶𝑅 = ⎡⎢
𝐹 = 𝑃𝑒 (1+𝑖) −1 ⎤
𝑛 ⎥
⎣ 𝑖(1+𝑖) ⎦
(remove -1 for PW factor)

ECON 2
Topics: Formulas:
Inflation INFLATION ○ SOYD Method: ○ Service Output Method:
𝑛 Mode → Stat → Quadratic (3 pts) 1. Solve for Qm (ex. Q4 and Q5)
Depreciation ✴ 𝐹 = 𝑃(1 + 𝑓)
Mode → Stat → Linear
𝑃(1+𝑖𝑓)
𝑛 x y
𝐹= x (units) y (BV)
(1+𝑓)
𝑛
0 FC
1+𝑖𝑓 0 FC
𝑖= −1 n SV
1+𝑓 Qn SV
DEPRECIATION ✴ n+1 SV
2. Solve for BV4 and BV5
𝐵𝑉𝑚 = 𝐹𝐶 − 𝐷𝑚 ○ Declining Balance Method
3. 𝑑5 = 𝐵𝑉4 − 𝐵𝑉5
○ Straight Line Method (SLM): (DBM) - Matheson’s Formula:
Mode → Stat → Linear Mode → Stat → ABexp 4. 𝐷𝑚 = 𝑑 𝑄𝑚 ( )
x y ○ Machine Hour Method:
x y
𝐹𝐶−𝑆𝑉
0 FC
𝑑𝑛 = 𝑈𝐻
× 𝐻𝑈
0 FC
UH – useful hours
n SV n SV
HU – hours used
○ Sinking Fund Method (SFM): 1. Solve for BV4 and BV5 𝐵𝑉𝑚 = 𝐹𝐶 − 𝐷𝑚
(1+𝑖) −1 ⎤
𝑛 2. 𝑑5 = 𝐵𝑉4 − 𝐵𝑉5 𝐵𝑉2 = 𝐹𝐶 − 𝑑1 − 𝑑2
𝐹𝐶 − 𝑆𝑉 = 𝑑⎡⎢ ⎥
⎣ 𝑖 ⎦ ○ DDBM: ○ MACRS Method:
(1+𝑖)
𝑚
−1 Mode → Stat → ABexp
𝐷𝑚 = 𝑑⎡⎢ 𝑖
⎤
⎥ %𝑑1 =
1
𝑛
⎣ ⎦ x y
+ SUNK COST (#18)
1. 𝐵𝑉𝑚 = 𝐹𝐶 − 𝐷𝑚 0 FC %𝑑𝑚 = ( )(1 − Σ 𝑝𝑟𝑒𝑣)
2
𝑛

2. 𝑆𝑢𝑛𝑘 𝐶𝑜𝑠𝑡 = 𝐵𝑉𝑚 − 𝑆𝑉𝑚 1 𝐹𝐶 1 − ( 2

𝑛 ) 𝑑1 = %𝑑1 × 𝐹𝐶
𝑑𝑚 = %𝑑𝑚 × 𝐹𝐶
1. Solve for BV4 and BV5
2. 𝑑5 = 𝐵𝑉4 − 𝐵𝑉5 𝐷𝑚 = 𝑑1 + 𝑑2 + … + 𝑑𝑚
ECON 3
Topics: Formulas:
Capitalized Cost & Annual Cost CAPITALIZED COST BONDS STOCKS
Break Even Analysis 𝑅𝐶−𝑆𝑉 𝑂𝑀 ○ Case 1:
𝐶 = 𝐹𝐶 + 𝑛 + 𝑖
(1+𝑖) −1 𝑑
Benefit-Cost Ratio / 1. 𝑖 = 𝑃𝑜
Present-Worth Index ANNUAL COST
𝐴𝐶 = 𝐶𝑖 ○ Case 2:
1
Rate of Return BREAK EVEN ANALYSIS 1. 𝑑1 = 𝑑(1 + 𝑔)

Recovery Period 𝐶𝑜𝑠𝑡 = 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑑1

2. 𝑖 = +𝑔
BENEFIT-COST RATIO 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑑 = 𝑖𝑑 × 𝐶𝑏 𝑃𝑜
Payout Period
𝑃𝑊 𝑜𝑓 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠 (use id for this formula only) ○ Case 3:
𝐵𝐶𝑅 = 𝐶𝑜𝑠𝑡
Bonds ★ Sample Steps: 1. 𝑃𝑛 = 𝑃𝑜(1 + 𝑔)
𝑛
Benefits = Gross Income – Exp 𝑚
Stocks Expenses = Tax, Labor, Deprec 1. 𝑖
𝑒
= 1+( 𝑟
𝑚 ) −1 2. 𝑑𝑛 = 𝑑(1 + 𝑔)
𝑛

Comparing Alternatives 𝑟 𝑑𝑛
▷ Compare Present Worths RATE OF RETURN 2. 𝑖 = 𝑚 3. 𝑖 = +𝑔
𝑃𝑛
▷ Compare Annual Costs 𝑅𝑂𝑅 =
𝐴𝑛𝑛𝑢𝑎𝑙 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 3. 𝑑 = 𝑖𝑑 × 𝐶𝑏
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑
ANP = Savings - Expenses 4. 𝐹𝑑 (using annuity formula)
Capital = Fixed + Working 5. 𝐹𝑉𝑛 = 𝑉𝑛(1 + 𝑖)
𝑛

RECOVERY PERIOD
Example:
1
𝑅𝑃 = 9.76% 50
𝑅𝑂𝑅 𝐹50 = 𝑉𝑛 1 + ( 2 )
PAYOUT PERIOD 𝐹50 = 10. 83𝑉𝑛
𝐹𝑖𝑥𝑒𝑑 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
𝑃𝑃 = 𝐴𝑁𝑃 + 𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑝𝑟𝑒𝑐 6. 𝐹𝑉𝑛 = 𝐹𝑑 + 𝐶𝑏 (solve for Vn)