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Compounding Periods Different From Payment Periods
• C = number of compounding periods per year.
• P = number of payments periods per year.
• i = periodic interest rate, expressed as a percentage.
• r = i / 100, periodic interest rate expressed as a decimal.
• i
PMT
= ((1 + r / C)
C/P
- 1)100
Investment Analysis
Lease vs. Purchase
• PMT
p
= loan payment for purchase.
• PMT
L
= lease payment.
• I
n
= interest portion of PMT
p
for period n.
• D
n
= depreciation for period n.
• M
n
= maintenance for period n.
• T = marginal tax rate.
•
• Cost of owning(n) = PMT
p
- T(I
n
+ D
n
) + (1 - T)M
n
Break-Even Analysis and Operating Leverage
• GP = Gross Profit.
• P = Price per unit.
• V = Variable costs per unit.
• F = Fixed costs.
• U = number of Units.
• OL = Operating Leverage.
• GP = U(P - V) - F
•
tjfdisafsdakflsafsa f xk,()
Fcos DSAFF
1i+()
n
-----------------------------------------------------------------------------------------------------------
n1=
k
∑
cost of leasing (n) - cost of owning (n)
Net purchasing advantage =
OL
UP V–()
UP V–()F–
---------------------------------=