1. Complex Cash Flows Break complex flows into simpler patterns:
Engineering Economy
6/8/2018 2:15 PM
Complex Cash Flows
Break complex flows into simpler patterns:
Match to P, F, A, G, or g patterns
Convert individual patterns to either P or F equivalent
Convert P and F equivalents to the same point in time
Use P/F or F/P factors
Combine the equivalent cash flows at the same point in time
(compute the net equivalent)
Copyright (c) , D. H. Jensen & K. D. Douglas

2. Example 1:
Find the Year 5 equivalent of all cash flows, at an interest rate of 12% per year:
YR5 = ?
$ 1 000
$ 2 000
YR5 = – [$1000 (F/A,12%,4) (F/P,12%,2) + $2000 (P/A,12%,7) (P/F,12%,1)]
= – [$1000 (4.7793) (1.2544) + $2000 (4.5638) (.8929)]
= – [$ $8150] = – $

3. Example 2:
Find the net cash flow (x), if the interest rate is 18% per year:
x = ?
$ 700
$ 700
$ 800
$ 950
$ 800
X = $700 (F/P,18%,7) + $700 (F/P,18%,4) – $800 (F/A,18%,2) (F/P,18%,8)
– $950 (F/A,18%,2) (F/P,18%,1) – $800 (P/A,18%,3)
= $ $1357 – $6556 – $2444 – $1739= $ – 7 152

4. Example 3:
Add P, F , A , G, and g cash flows, then pick a point in time (x) and find the net flow, if interest is 8% per year: