Future Worth Method

Example 5.1,Page 54

In [3]:
#initialisation of variable
#alternate A
P=5000000.0;#in Rs
A=2000000.0;#in Rs
i=18.0;#in % per annum
n=4.0;#in years

#calculation
FW_A=(-P*(1+i/100)**n)+(A*(((1+i/100)**n)-1)/(i/100));#in RS

#result
print "The future worth amount of alternative A in RS.  ",round(FW_A,3);

#alternate B
P=4500000.0;#in Rs
A=1800000.0;#in Rs
i=18.0;#in % per annum
n=4.0;#in years

#calculation
FW_B=(-P*(1+i/100)**n)+(A*(((1+i/100)**n)-1)/(i/100));#in RS
print "The future worth amount of alternative B in RS.  ", round(FW_B,3);
print "The future worth of alternative A is greater than that of alternative B. Thus, alternative A should be selected.";
print " Calculation in the book is not accurate."

The future worth amount of alternative A in RS.   736975.2
The future worth amount of alternative B in RS.   663277.68
The future worth of alternative A is greater than that of alternative B. Thus, alternative A should be selected.
 Calculation in the book is not accurate.

Example 5.2,Page 58

In [5]:
#initialisation of variable
#alternate 1
FC=2000000.0;#in Rs
AI=800000.0;#in Rs
ATax=80000.0;#in Rs
NetAI=AI-ATax;#in Rs
i=12.0;#in % per annum
n=20.0;#in years

#calculation
FW_1=(-FC*(1+i/100)**n)+(NetAI*(((1+i/100)**n)-1)/(i/100));#in RS

#result
print "The future worth amount of alternative 1 in RS. : ", round(FW_1,3)

#alternative2
FC=3600000.0;#in Rs
AI=980000.0;#in Rs
ATax=150000.0;#in Rs
NetAI=AI-ATax;#in Rs
i=12.0;#in % per annum
n=20.0;#in years

#calculation
FW_2=(-FC*(1+i/100)**n)+(NetAI*(((1+i/100)**n)-1)/(i/100));#in RS

#result
print "The future worth amount of alternative 2 in RS.",round(FW_2,3)
print"The future worth of alternative 1 is greater than that of alternative 2. Thus, building the gas station is the best alternative.";
print " Calculation in the book is not accurate."

The future worth amount of alternative 1 in RS. :  32585172.373
The future worth amount of alternative 2 in RS. 25076872.093
The future worth of alternative 1 is greater than that of alternative 2. Thus, building the gas station is the best alternative.
 Calculation in the book is not accurate.

Example 5.3,Page 59

In [8]:
#initialisation of variable
#part a
#alternative 1
P=500000.0;#in Rs
A1=50000.0;#in Rs
G=50000.0;#in Rs
i=8.0;#in % per annum
n=6.0;#in years

#calculation
FW_1=(-P*(1+i/100)**n)+(A1+G*(((1+i/100)**n)-i*n/100-1)/(((i/100)*(1+i/100)**n)-i/100))*(((1+i/100)**n)-1)/(i/100);#in RS

#result
print "The future worth amount of alternative 1 in RS.  ", round(FW_1,3);

#alternative 2
P=700000.0;#in Rs
A1=70000.0;#in Rs
G=70000.0;#in Rs
i=8.0;#in % per annum
n=6.0;#in years

#calculation
FW_2=(-P*(1+i/100)**n)+(A1+G*(((1+i/100)**n)-i*n/100-1)/(((i/100)*(1+i/100)**n)-i/100))*(((1+i/100)**n)-1)/(i/100);#in RS

#result
print "The future worth amount of alternative 2 in RS.  ", round(FW_2,3);
print "The future worth of alternative 2 is greater than that of alternative 1. Thus, alternative 2 must be selected.";


#part b
#alternative a
P=500000.0;#in Rs
A1=50000.0;#in Rs
G=50000.0;#in Rs
i=9.0;#in % per annum
n=6.0;#in years

#calculation
FW_1=(-P*(1+i/100)**n)+(A1+G*(((1+i/100)**n)-i*n/100-1)/(((i/100)*(1+i/100)**n)-i/100))*(((1+i/100)**n)-1)/(i/100);#in RS

#result
print "The future worth amount of alternative 1 in RS.  ", round(FW_1,3);

#altenative 2
P=700000.0;#in Rs
A1=70000.0;#in Rs
G=70000.0;#in Rs
i=9.0;#in % per annum
n=6.0;#in years

#calculation
FW_1=(-P*(1+i/100)**n)+(A1+G*(((1+i/100)**n)-i*n/100-1)/(((i/100)*(1+i/100)**n)-i/100))*(((1+i/100)**n)-1)/(i/100);#in RS

#result
print "The future worth amount of alternative 2 in RS.", round(FW_1,3);
print "The negative sign of alternatives future worth indicates that alternative 2 incurs loss. Thus, none of the two alternatives should be selected. ";
print " Calculation in the book is not accurate."

The future worth amount of alternative 1 in RS.   408314.938
The future worth amount of alternative 2 in RS.   571640.914
The future worth of alternative 2 is greater than that of alternative 1. Thus, alternative 2 must be selected.
The future worth amount of alternative 1 in RS.   383913.653
The future worth amount of alternative 2 in RS. 537479.115
The negative sign of alternatives future worth indicates that alternative 2 incurs loss. Thus, none of the two alternatives should be selected. 
 Calculation in the book is not accurate.

Example 5.4 Page 62

In [10]:
#initialisation of variable
#alternative 1
P=8000000.0;#in Rs
A=800000.0;#in Rs
i=20.0;#in % per annum
n=12.0;#in years
Salvage=500000;#in Rs

#calcualtion
FW1=P*(1+i/100)**n+A*(((1+i/100)**n)-1)/(i/100)-Salvage;#in RS

#result
print "The future worth for this alternative in RS.",round(FW1,3)

#alternative 2
P=7000000.0;#in Rs
A=900000.0;#in Rs
i=20.0;#in % per annum
n=12.0;#in years
Salvage=400000;#in Rs

#calculation
FW2=P*(1+i/100)**n+A*(((1+i/100)**n)-1)/(i/100)-Salvage;#in RS

#result
print "The future worth for this alternative in RS.",round(FW2,3);

#alternative 3
P=9000000.0;#in Rs
A=850000.0;#in Rs
i=20.0;#in % per annum
n=12.0;#in years
Salvage=700000;#in Rs

#calculation
FW3=P*(1+i/100)**n+A*(((1+i/100)**n)-1)/(i/100)-Salvage;#in RS

print "The future worth for this alternative in RS.  ",round(FW3,3)
print "The future worth of alternative 2 is less than that of other two alternatives. Thus, Ms. Krishna castings should buy the annealing furnace from manufacturer 2.";
print " Calculation in the book is not accurate."

The future worth for this alternative in RS. 102493205.379
The future worth for this alternative in RS. 97635155.155
The future worth for this alternative in RS.   113188330.939
The future worth of alternative 2 is less than that of other two alternatives. Thus, Ms. Krishna castings should buy the annealing furnace from manufacturer 2.
 Calculation in the book is not accurate.

Example 5.5 Page 64

In [13]:
#initialisation of variable
#Machine A
P=400000.0;#in Rs
A=40000.0;#in Rs
S=200000.0;#in Rs
i=12.0;#in % per annum
n=4.0#in years

#calculation
FW_A=(P*(1+i/100)**n)+(A*(((1+i/100)**n)-1)/(i/100))-S;#in RS

#result
print "The future worth amount of Machine A in RS. ",round(FW_A,3);

#Machine B
P=800000.0;#in Rs
A=0.0;#in Rs
S=550000.0;#in Rs
i=12.0;#in % per annum
n=4.0#in years

#calculation
FW_B=(P*(1+i/100)**n)+(A*(((1+i/100)**n)-1)/(i/100))-S;#in RS

#result
print "The future worth amount of Machine B in RS. ",round(FW_B,3);
print "The future worth of Machine A is less than that of Machine B. Thus, Machine A should be selected.";
print " Calculation in the book is not accurate"

The future worth amount of Machine A in RS.  620580.864
The future worth amount of Machine B in RS.  708815.488
The future worth of Machine A is less than that of Machine B. Thus, Machine A should be selected.
 Calculation in the book is not accurate