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    This Module Contains The Basic Knowledge and Other Terminologies of Cash-Flow and Cash-Flow Diagram

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    derping lemon
    This document discusses cash flow diagrams and their application in economic analysis. It begins by defining cash flow diagrams as graphical representations of cash flow over time, with receipts shown as upward arrows and disbursements as downward arrows. It then provides examples of simple and compound interest cash flow diagrams for a lender, borrower, and loan scenario involving an original loan amount extended over 10 years with a change in interest rate and type. The objectives are to understand cash flow terminology and processes, solve complex problems confidently, and apply the knowledge to other subjects.

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    This Module Contains The Basic Knowledge and Other Terminologies of Cash-Flow and Cash-Flow Diagram

    Uploaded by

    derping lemon
    37 views8 pages
    This document discusses cash flow diagrams and their application in economic analysis. It begins by defining cash flow diagrams as graphical representations of cash flow over time, with receipts shown as upward arrows and disbursements as downward arrows. It then provides examples of simple and compound interest cash flow diagrams for a lender, borrower, and loan scenario involving an original loan amount extended over 10 years with a change in interest rate and type. The objectives are to understand cash flow terminology and processes, solve complex problems confidently, and apply the knowledge to other subjects.

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    ECON-MODULE-03.docx

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    This document discusses cash flow diagrams and their application in economic analysis. It begins by defining cash flow diagrams as graphical representations of cash flow over time, with receipts shown as upward arrows and disbursements as downward arrows. It then provides examples of simple and compound interest cash flow diagrams for a lender, borrower, and loan scenario involving an original loan amount extended over 10 years with a change in interest rate and type. The objectives are to understand cash flow terminology and processes, solve complex problems confidently, and apply the knowledge to other subjects.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    37 views8 pages

    This Module Contains The Basic Knowledge and Other Terminologies of Cash-Flow and Cash-Flow Diagram

    Uploaded by

    derping lemon
    This document discusses cash flow diagrams and their application in economic analysis. It begins by defining cash flow diagrams as graphical representations of cash flow over time, with receipts shown as upward arrows and disbursements as downward arrows. It then provides examples of simple and compound interest cash flow diagrams for a lender, borrower, and loan scenario involving an original loan amount extended over 10 years with a change in interest rate and type. The objectives are to understand cash flow terminology and processes, solve complex problems confidently, and apply the knowledge to other subjects.

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    You are on page 1of 8

    Bataan Heroes College

    CASHFLOW
    Module Description:
    This module contains the basic knowledge and other terminologies of cash-
    flow and cash-flow diagram.

    Objectives of the Module:

    At the end of this module, the students are expected:

    a. To fully understand the terminologies and processes using cash-flow


    diagram and its application on economic problem analysis.
    b. To solve complex problems with confidence.
    c. To apply their new knowledge with other subjects.

    CASH-FLOW
    Cash-flow diagram is a graphical representation of cash flow drawn on a certain
    time scale. Cash-flow diagram for economic analyisis can be compared to free
    body diagram for engineering mechanics problems.

    RECEIPT (POSITIVE CASH FLOW)

    Upward arrow

    DISBURSEMENT (NEGATIVE CASH FLOW)

    Downward arrow

    1|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez
    Bataan Heroes College

    SIMPLE INTEREST

    A loan of 1000$ at a simple interest of 10% will become 1500$ after 5 years.

    2|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez
    Bataan Heroes College

    1500

    0
    5
    1 2 3 4

    1000
    Lender’s cash flow diagram POV

    3|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez
    Bataan Heroes College

    1000

    5
    0
    1 2 3 4

    1500

    Borrower’s cash flow diagram POV

    Compound Interest

    4|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez
    Bataan Heroes College

    1 2 3 n-1
    n
    0
    F=

    Borrower’s cash flow diagram POV

    where: P = present value

    F = future value

    I = interest rate

    n = number of period

    Example

    A 20 000$ loan was originally made at 10% simple interest for 5 years. at the end of this period
    the loan was extended for another 5 years, without the interest being, but the new interest rate
    was made 11% compounded semi-annually. How much should the borrower pay at the end of 10
    years?

    5|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez
    Bataan Heroes College

    Given:

    P = 20 000$

    i 1= 10%

    i 2= 11%

    n1= 5 years

    n2 = 5 years

    m 2= 2 for semi-annually

    2 0 000
    Simple interest Compound Interest

    1 2 3 4 5 6 7 8 9 10
    0

    6|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez
    Bataan Heroes College

    Formula

    F = P + Pin

    r
    F = P(1+i)mn ;where i=
    m

    Solution

    Compute for the future value after 5 years from year 0 using simple interest

    F 5 = 20 000 + 20 000 (0.10) (5)

    F 5 = 30 000 $

    Compute for the future value after 5 years from year 5 using the solved value above as
    present worth

    F = P(1+i)mn

    0.11 2 (5 )
    F = 30 000(1+ )
    2

    F = 51 244.33 $

    20 000
    Simple interest Compound Interest

    1 2 3 4 5 6 7 8 9 10
    0

    7|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez
    Bataan Heroes College

    References

    Arreola, Matias (1993). Engineering Economy – A Systematic Approach to Engineering


    Economy (3rd ed.). Ken Incorporated.

    Sta. Maria, Hipolito. (2007). Engineering Economy (3rd ed.). National Bookstore.

    8|Page
    Cash-flow Diagram
    Engr. Lucas & Engr. Cortez

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