(4-5)Uniform series with middle of period cash flows:

When assumed the cash flow occur at the middle of each time period, the interest factors
multiplied by "Half-period correction" factor.
i.e: when (i) is the effective interest rate per period the half – period correction (HPC) is applied
to interest factors in Appendix.

HPC=√𝟏 + 𝒊

F4
𝟏
𝟐

0 1 2 3 4 5

Example:
The figure below is cash flow diagram of annually consisting of 4 middle of year amounts of
200 $. If (i) per year = 10%
Determine:
a) The present worth of the uniform series at the beginning of the first year?
b) The equivalent future worth at the end of the fourth year?

Sol. P0 = ?
F4 = ?

a) 200 200 200

200
P-
(1+i)n −1
P-1/2 = 200 [ ] = 633.98$ 1/2
i(1+i)n

P0= P-1⁄2 (HPC) = 633.98 √1 + 0.1 - 1/2 0 1 2 3 4

= 633.98 * 1.048 = 664.92 $
b)
F4 = A (F/A, 10 %, 4) (HPC)

(1+i)n −1
F =A[ ] *(HPC)
i

= 200(4.641) (1.048) = 973.5 $

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Engineering economics Shang Asmat Mohammed
Example:
If 1500 $ is to be received at the end of 5 years when i per year is 15 %. What middle –of –year
uniform amount would be equivalent to this future amount?

Sol.

F4 (HPC) = F5
1

HPC = √1 + 0.15 = 1.0724

2

i
A = F4 [ (1+i)n −1 ]
1
2

1500
A = 1.0724 (0.1483) = 207.43 $

(4-6)Uniform Gradient Series:-

The uniform gradient cash flow series which either increase or decrease

n
1 2 3
0

g1
g2 g3
P

(n-1)g

That means the cash flow either is increased or decreased (cost) changes by the same amount
each year which is called the (gradient).

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Engineering economics Shang Asmat Mohammed
 𝑮 𝒏𝑮 𝒊
R*= − [ (𝟏+𝒊)𝒏 −𝟏
]
𝒊 𝒊

When we have increasing gradient: -

A= A1+ R*
A1
Increasing Gradient
A2

A1+ R* A1+ R*

When we have decreasing gradient: -

A2

decreasing Gradient
A1

A=A1- R*

In special case A1- R* A1- R*

𝑮 𝒏𝑮 𝒊
A= − [ (𝟏+𝒊)𝒏 −𝟏
]
𝒊 𝒊

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Engineering economics Shang Asmat Mohammed
Example:
What is the equivalent annual payment to an amount paid at the end of the first year 100 $ , and
increasing uniformly by 10 $ for each year to period of 15 years with interest =12% ?
G nG i
R*= i − [ (1+i)n −1
]
i
n = 15 , I = 12%
10 15∗10 0.12
R*=0.12 − [ (1+0.12)15 −1
]
0.12

= 49.8 $ A1=100
$
G = 10 $

A =A + R*= 100 + 49.8

= 149.8 $

A1+

Example: R*

st nd
If the maintenance cost for a machine at the 1 year is 200 $ and at the 2 year is 250 $. And at
rd th th
the 3 year is 300$, at the 4 year is 350 $, at the 5 year is 400 $. Find the uniform average for
the annual maintenance cost when i= 5%?
Sol.

50 5∗50 0.05
R* = - [ (1+0.05)5 −1
] = 95.12$
0.05 0.05

A = A1 + R* = 200 + 95.12 = 295.12$

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Engineering economics Shang Asmat Mohammed