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Interest and Depreciation Formulas

The document outlines various financial concepts including simple interest, compound interest, annuities, perpetuities, and depreciation methods. It provides formulas for calculating interest, future amounts, and depreciation using different methods such as straight-line, sum-of-the-years-digits, and declining balance. Additionally, it discusses capitalized and annual costs in financial analysis.

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jlilagan69
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11 views2 pages

Interest and Depreciation Formulas

The document outlines various financial concepts including simple interest, compound interest, annuities, perpetuities, and depreciation methods. It provides formulas for calculating interest, future amounts, and depreciation using different methods such as straight-line, sum-of-the-years-digits, and declining balance. Additionally, it discusses capitalized and annual costs in financial analysis.

Uploaded by

jlilagan69
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

SIMPLE INTEREST

𝐼 = 𝑃𝑖𝑛 Where: 𝑃 = principal/loan


𝐼 = interest
𝑖 = interest rate
𝑛 = period
𝐹 = 𝑃(1 + 𝑖𝑛) Where: 𝐹 = future amount

ORDINARY SIMPLE INTEREST EXACT SIMPLE INTEREST


𝑑
𝑑 𝑛= if normal year
𝑛= ← banker year 365
360
𝑑
𝑛= if leap year
366

COMPOUND INTEREST
𝐹 = 𝑃(1 + 𝑖)𝑛 Where: 𝑃 = principal
𝑖 = interest per period
𝑛 = number of interest period
CONTINUOUS COMPOUNDING

𝐹 = 𝑃𝑒 (𝑁𝑅)𝑁 Where: 𝑃 = principal


𝑒 = 2.71828
𝑁𝑅 = nominal rate
𝑁 = number of years
EFFECTIVE RATE OF INTEREST
𝑁𝑅 𝑚
𝐸𝑅 = (1 + 𝑖)𝑚 − 1 or 𝐸𝑅 = (1 + ) −1
𝑚

Where: 𝑚 = number of period per year

ANNUITY
𝐴[(1+𝑖)𝑛 −1]
𝐹= Where: 𝐴 = uniform payment
𝑖

𝐴[(1+𝑖)𝑛 −1]
𝑃=
𝑖(1+𝑖)𝑛

PERPETUITY
𝐴
𝑃= Where: 𝑖 = interest per period
𝑖
𝐴 = uniform payment
UNIFORM PAYMENT SERIES
• With Continuous Compounding
1 − 𝑒 −𝑟𝑛
𝑃 = 𝐴( 𝑟 )
𝑒 −1
𝐴(𝑒 𝑟𝑛 − 1)
𝐹=
𝑒𝑟 − 1
• Based on Present Worth
𝑒𝑟 − 1
𝐴 = 𝑃( )
1 − 𝑒 −𝑟𝑛
• Based on Future Worth
𝐹(𝑒 𝑟 − 1)
𝐴=
𝑒 𝑟𝑛 − 1

DEPRECIATION

Depreciation during mth Book value


METHOD where
year during mth year

𝐶𝑜 − 𝐶𝑛
SLM 𝑑= 𝐶𝑚 = 𝐶𝑜 − 𝐷𝑚 𝐷𝑚 = 𝑑𝑚
𝑛

𝑑[(1 + 𝑖)𝑚 − 1] (𝐶𝑜 − 𝐶𝑛 )𝑖


SFM 𝐷𝑚 = 𝐶𝑚 = 𝐶𝑜 − 𝐷𝑚 𝑑=
𝑖 (1 + 𝑖)𝑛 − 1

𝑟𝑒𝑣𝑒𝑟𝑠𝑒 𝑑𝑖𝑔𝑖𝑡 𝑡𝑜𝑡𝑎𝑙 𝑜𝑓 𝑟𝑒𝑣𝑒𝑟𝑠𝑒


SYD 𝑑𝑚 = (𝐶𝑜 − 𝐶𝑛 )(
𝑠𝑢𝑚 𝑜𝑓 𝑑𝑖𝑔𝑖𝑡
) 𝐶𝑚 = 𝐶𝑜 − 𝐷𝑚 𝑑𝑚 = (𝐶𝑜 − 𝐶𝑛 )(
𝑠𝑢𝑚 𝑜𝑓 𝑑𝑖𝑔𝑖𝑡
)

𝑛 𝐶𝑛
DBM 𝑑𝑚 = 𝐶𝑜 (1 − 𝑘)𝑚−1𝑘 𝐶𝑚 = 𝐶𝑜 (1 − 𝑘)𝑚 𝑘 =1− √
𝐶𝑜

Capitalized Cost Annual Cost


𝐶𝑐 = 𝐶𝑜 + 𝑃 𝑜𝑓 𝑎𝑙𝑙 𝑐𝑜𝑠𝑡𝑠 𝐴𝑐 = 𝐴𝑑 + 𝐶𝑜 (𝑖) + 𝑂𝐶
if Ac is given:
𝐴𝑐
𝐶𝑐 = 𝐶𝑜 +
𝑖

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