What is the factor name of the formula (1+i)^-n?

What is the factor name of the formula (1+i)^-n?

• A. Capital Recovery
• B. Interest Recovery
• C. Single Payment Present Worth
• D. Uniform Gradient Future Worth

Answer: (C)

The formula \( (1+i)^{-n} \) represents the present worth factor, also known as the single payment present worth factor. This factor is used in engineering economics to calculate the present value of a single future cash flow. When you are looking at how much a future amount of money is worth in terms of today’s value, you apply this factor. This formula derives from the concept of discounting, where future cash flows are adjusted back to their present value using the interest rate \( i \) over a time period \( n \). The expression indicates how much you would pay today to receive a sum of money in the future, considering the time value of money. The other options relate to different financial calculations. Capital Recovery focuses on the amount to be recovered from an investment over time, interest recovery discusses regaining interest that was paid, and uniform gradient future worth deals with cash flows that change uniformly over time. These are not directly tied to the calculation of present worth for a single sum of money, which solidifies why the option referring to the single payment present worth is correct in this context.

The formula ( (1+i)^{-n} ) represents the present worth factor, also known as the single payment present worth factor. This factor is used in engineering economics to calculate the present value of a single future cash flow. When you are looking at how much a future amount of money is worth in terms of today’s value, you apply this factor.

This formula derives from the concept of discounting, where future cash flows are adjusted back to their present value using the interest rate ( i ) over a time period ( n ). The expression indicates how much you would pay today to receive a sum of money in the future, considering the time value of money.

The other options relate to different financial calculations. Capital Recovery focuses on the amount to be recovered from an investment over time, interest recovery discusses regaining interest that was paid, and uniform gradient future worth deals with cash flows that change uniformly over time. These are not directly tied to the calculation of present worth for a single sum of money, which solidifies why the option referring to the single payment present worth is correct in this context.