TABLE OF CONTENTS Money today is worth more than money in the future. Future dollars cannot be directly compared with today's dollar value. Knowing the actual worth of present values, future values, payments, and receipts is very important in calculating an accurate Life Cycle Cost (LCC) for a system or component. LCC and Level of Repair (LOR) analysis take into account FY (Fiscal Year) dollars. LCC and LOR include costs associated with the development, production, operations and management, procurement, maintenance, and disposal of a system or component.
Examples:
| Where | Sample Data | ||
|---|---|---|---|
| P: | Present value | = | $ 500.00 |
| F: | Future sum | = | $1,079.46 |
| A: | Periodic equal sums of money | = | $ 74.51 |
| G: | Gradient amount | = | $ 5.00 |
| i: | Annual interest rate | = | 8% |
| n: | Interest period | = | 10 years |
| m: | Compounding periods per year | = | 12 periods |
The Single Payment Present Worth (SPPW) formula determines the present value of a future amount after so many years, at a specified interest rate. The present value of a spare part worth $1,079.46, 10 years from now at 8% interest compounded annually is:
The present value when compounded m times (example: m = 12) per year is:
The present value compounded continuously is:
The Equal Payment Series Present Worth (EPSPW) formula determines the present value of an equivalent uniform annual series of payments beginning at the end...
