Time Value of Money

1. Time Value of Money TKS 7318_3 nikosiameva@yahoo.com Universitas Jenderal Soedirman

2. Cash Flow • Cash flow digunakan untuk memilih alternatif yang memiliki perbedaan konsekwensi (cost & benefit) yang berlanjut seiring dengan berjalannya waktu. • Contoh: • If an expensive piece of machinery is installed in a plant were brought on credit, the simple process of paying for it may take several years • The resulting favorable consequences may last as long as the equipment performs its useful function • Each project is described as cash receipts or disbursements (expenses) at different points in time

3. Categories of Cash Flows • The expenses and receipts due to engineering projects usually fall into one of the following categories: • First cost: expense to build or to buy and install • Operations and maintenance (O&M): annual expense: electricity, labor, and minor repairs • Salvage value: receipt at project termination for sale or transfer of the equipment (can be a salvage cost) • Revenues: annual receipts due to sale of products or services • Overhaul: major capital expenditure occurs during the asset’s life

4. Example of Cash Flows Seorang manajer ingin membeli Mixing Machine $30.000. Pembayaran mesin dapat dilakukan dengan dua cara, yaitu: 1. Dibayar tunai dengan mendapat diskon 3% 2. Dibayar tiga kali, pembayaran awal $5.000, diakhir tahun pertama membayar cicilan $8.000, dan selama empat th berikutnya $6.000 tiap tahun. Buat evaluasi analisis dalam bentuk tabel cash flow.

5. Example of Cash Flows Jawab:

6. Cash Flow Diagrams • The costs and benefits of engineering projects over time are summarized on a cash flow diagram (CFD). • Specifically, CFD illustrates the size, sign, and timing of individual cash flows, and forms the basis for engineering economic analysis • A CFD is created by first drawing a segmented time-based horizontal line, divided into appropriate time unit. • Each time when there is a cash flow, a vertical arrow is added  pointing down for costs and up for revenues or benefits. The cost flows are drawn to relative scale.

7. Drawing a Cash Flow Diagram • In a cash flow diagram (CFD) the end of period t is the same as the beginning of period (t+1) • Beginning of period cash flows are: rent, lease, and insurance payments • End-of-period cash flows are: O&M, salvages, revenues, overhauls • The choice of timeis arbitrary. • It can be when a project is analyzed • when funding is approved • or when construction begins

8. Drawing a Cash Flow Diagram • One person’s cash outflow (represented as a (-)value) is another person’s inflow (represented as a (+) value). • It is better to show two or more cash flows occurring in the same year individually so that there is a clear connection from the problem statement to each cash flow in the diagram • Contoh: Seorang pengusaha meminjam uang di bank $1000 dengan bunga 8%. Ia setuju untuk membayar penjaman dalam 2 tahun. Pada akhir tahun pertama, ia akan membayar setengah dari jumlah pinjaman ditambah bunga.

9. An Example of Cash Flow Diagram Pada akhir tahun kedua, ia akan membayar setengah sisanya & bunga tahun ke-2. Hitunglah cash flow pengusaha tersebut. $1,000 1 2 0 $540 $580

10. Time Value of Money • Money has value • Money can be leased or rented • The payment is called interest • If you put $100 in a bank at 9% interest for one time period you will receive back your original $100 plus $9 Original amount to be returned = $100 Interest to be returned = $100 x .09 = $9

11. Time Value of Money • Seseorang meminjam uang $5.000 yang akan dibayar 5 tahun kemudian, dengan bunga tahunan 8%. Buat cash flow alternatif pengembalian uang tersebut: 1. Tiap tahun membayar $1.000 ditambah bunga 2. Tiap tahun membayar bunga, sedangkan pokok pinjaman dibayar pada akhir tahun ke-5 3. Pada akhir th ke-5 dibayar pokok pinjaman & bunganya 4. Tiap tahun membayar dalam jumlah yang sama Jika kriteria pilihan adalah pengembalian paling ekonomis, alternatif mana yang dipilih

12. Time Value of Money

13. Time Value of Money