PLANNING WEEKDATESYLLABUS 131/10/2013CHAPTER 1 27/11/2013CHAPTER 2 314/11/2013CHAPTER 3 (QUIZZES/ ASSIGNMENT) 421/11/2013IR AZLAN’s 528/11/2013IR AZLAN’s 65/12/2013CHAPTER 4 (QUIZZES/ ASSIGNMENT) 712/12/2013CHAPTER 5 819/12/2013CHAPTER 6 (OMR)

CHAPTER 3 MONEY-TIME RELATIONSHIPS AND EQUIVALENCE

WHAT YOU WILL LEARN? Cash Flow – details Interest - simple interest, compound interest Economic equivalence Money-time relation – Present value (P), Future value (F), Uniform series (Annuity, A)

Cash flow Define Cash Flow Discuss General Workflow Work an Example

Cash flow Cash Flow – A series of expenses and credits that run over the lifetime of a project – transactions Transactions can take place at any point during a project It can be Costs (Expenses, Disbursements, Payments) Receipts (Credits, Revenue)

Cash flow General Workflow Transactions typically defined in the problem statement. E.g.: Consider a mechanical device that will cost $20,000 when purchased. Maintenance will cost $1000 each year. The device will generate revenues of $5000 each year for five years, after which the salvage value is expected to be $7000. Construct a cash flow diagram to represent the situation

Cash flow- General Workflow 1 st Step: Identify 1) Where it occurs 2) Expense or credit 3) Magnitude

Cash flow- General Workflow 2 nd Step: Summarize in Cash Flow Diagram Period 10 7

Cash flow- General Workflow Important note: Two sides to every transaction, so the cash flow directions depend on the point of view taken. Ex: Initial cost $25,000 Expected return: 6% Period: 8 Years Assume no maintenance and illustrate the cash flow diagram

Cash flow- General Workflow YEARCASH FLOW 0-25, (6% of 25,000)

Cash flow- General Workflow 25,

INTEREST The fee that a borrower pays to a lender for the use of his or her money. INTEREST RATE The percentage of money being borrowed that is paid to the lender on some time basis.

INTEREST “Janganlah kamu sakiti sesiapapun agar orang lain tidak menyakiti kamu pula. Ingatlah bahawa sesungguhnya kamu akan menemui Tuhan kamu dan Dia pasti akan membuat perhitungan atas segala amalan kamu. Allah telah mengharamkan riba', oleh itu segala urusan yang melibatkan riba' hendaklah dibatalkan mulai sekarang” “Hurt no one so that no one may hurt you. Remember that you will indeed meet your LORD, and that HE will indeed reckon your deeds. ALLAH has forbidden you to take usury (interest), therefore all interest obligation shall henceforth be waived”. Muhammad (pbuh), The Farewell Sermon, Mount Arafat (0632)

SIMPLE INTEREST The total interest earned or charged is linearly proportional to the initial amount of the loan (principal), the interest rate and the number of interest periods for which the principal is committed. When applied, total interest “I” may be found by I = ( P ) ( N ) ( i ), where – P = principal amount lent or borrowed – N = number of interest periods ( e.g., years ) – i = interest rate per interest period INTEREST

You are starting your own small business in Kangar. You borrow $10,000 from the bank at a 9% rate for 5 years. Find the interest you will pay on this loan. I = P x N x i =10,000 x 5 x 0.09 = $ 4500

COMPOUND INTEREST Whenever the interest charge for any interest period is based on the remaining principal amount plus any accumulated interest charges up to the beginning of that period. PeriodAmount owed at beginning of the period Interest amount of period Amount owed at the end of the period 11, , , ,331

QUIZ 1 1) Resource can be divided into three categories. List and describe all the three categories. 2) Construct and describe the life cycle cost diagram showing all the six phases involved.