This document provides an overview of engineering economics and the fundamentals of performing engineering economy studies. It discusses key topics such as the description and role of engineering economics in decision making, the steps involved in an engineering economy study, important terminology and symbols used, estimating and diagramming cash flows, and the concepts of interest rates and rates of return. The overall purpose is to introduce engineering students to the basic techniques and principles of engineering economic analysis.
The document discusses the importance of engineering economy in decision making for individuals, businesses, and government agencies. Engineering economy provides quantitative analysis techniques to evaluate and compare the costs and benefits of project alternatives over time. It helps structure the estimates needed to evaluate alternatives and select the most economically favorable option based on metrics like present worth, rate of return, and benefit-cost ratio.
Engineering economics deals with evaluating the costs and benefits of engineering projects over time. It uses time value of money concepts like present and future value to analyze cash flows. Cash flows are summarized in diagrams with costs below and benefits above the time line. Equivalence techniques convert cash flows to a common point in time to compare project alternatives. Present worth analysis discounts all cash flows to the present using a discount rate to determine the net present value of projects.
This document discusses cash flow diagrams and examples of how to construct them. It defines key terms like present value, future value, interest rate and cash flows. It provides 4 examples of cash flow scenarios and diagrams showing deposits, withdrawals and loans over time. The diagrams visually represent the direction and timing of cash inflows and outflows to analyze the total amounts involved in each scenario.
Makalah ini membahas konsep nilai waktu dari uang dan ekuivalensi, termasuk perumusan bunga, present worth analysis, annual cash flow analysis, dan future worth analysis. Konsep nilai waktu dari uang menyatakan bahwa nilai uang pada masa depan akan berbeda dari nilai saat ini karena pengaruh faktor seperti inflasi dan suku bunga. Ekuivalensi adalah nilai yang berbeda pada waktu yang berbeda tetapi secara finansial mempuny
This document discusses nominal and effective interest rates. It begins by defining key terms like nominal rate, effective rate, compounding period, and payment period. It then explains how to convert between nominal and effective rates for different compounding frequencies. The document provides examples of calculating future values for single payments and series of payments when the payment period is greater than or less than the compounding period. It also covers calculations for continuous compounding and situations when interest rates vary over time.
No, in both cases the full interest is not earned/owed. When the payment period (PP) is less than the compounding period (CP), the interest is prorated based on the time elapsed within the CP. So in the savings account example, the interest earned on the first 2 monthly deposits would be less than the interest earned on the 3rd deposit. And for the credit card, paying early would reduce the interest owed for that period.
This document defines and explains different types of annuities, including ordinary annuity, annuity due, and deferred annuity. It provides formulas to calculate the present value and regular payments of each type of annuity. Key details include that ordinary annuity payments are made at the end of each interval, annuity due payments are made at the beginning of each interval, and deferred annuity payments begin at a later time.
This document provides an introduction and syllabus for an engineering economics course taught by Dr. Mohsin Siddique. It outlines the course details including the instructor's contact information, course goals and objectives, topics to be covered, assessment criteria, textbook information, and tentative schedule. The course aims to provide engineering students with the basic concepts of engineering economics to aid in decision making for engineering projects. Key topics include cost estimation, interest calculation, present worth analysis, rate of return analysis, and depreciation. Students will be assessed through quizzes, exams, assignments, and a final exam.
The document discusses the importance of engineering economy in decision making for individuals, businesses, and government agencies. Engineering economy provides quantitative analysis techniques to evaluate and compare the costs and benefits of project alternatives over time. It helps structure the estimates needed to evaluate alternatives and select the most economically favorable option based on metrics like present worth, rate of return, and benefit-cost ratio.
Engineering economics deals with evaluating the costs and benefits of engineering projects over time. It uses time value of money concepts like present and future value to analyze cash flows. Cash flows are summarized in diagrams with costs below and benefits above the time line. Equivalence techniques convert cash flows to a common point in time to compare project alternatives. Present worth analysis discounts all cash flows to the present using a discount rate to determine the net present value of projects.
This document discusses cash flow diagrams and examples of how to construct them. It defines key terms like present value, future value, interest rate and cash flows. It provides 4 examples of cash flow scenarios and diagrams showing deposits, withdrawals and loans over time. The diagrams visually represent the direction and timing of cash inflows and outflows to analyze the total amounts involved in each scenario.
Makalah ini membahas konsep nilai waktu dari uang dan ekuivalensi, termasuk perumusan bunga, present worth analysis, annual cash flow analysis, dan future worth analysis. Konsep nilai waktu dari uang menyatakan bahwa nilai uang pada masa depan akan berbeda dari nilai saat ini karena pengaruh faktor seperti inflasi dan suku bunga. Ekuivalensi adalah nilai yang berbeda pada waktu yang berbeda tetapi secara finansial mempuny
This document discusses nominal and effective interest rates. It begins by defining key terms like nominal rate, effective rate, compounding period, and payment period. It then explains how to convert between nominal and effective rates for different compounding frequencies. The document provides examples of calculating future values for single payments and series of payments when the payment period is greater than or less than the compounding period. It also covers calculations for continuous compounding and situations when interest rates vary over time.
No, in both cases the full interest is not earned/owed. When the payment period (PP) is less than the compounding period (CP), the interest is prorated based on the time elapsed within the CP. So in the savings account example, the interest earned on the first 2 monthly deposits would be less than the interest earned on the 3rd deposit. And for the credit card, paying early would reduce the interest owed for that period.
This document defines and explains different types of annuities, including ordinary annuity, annuity due, and deferred annuity. It provides formulas to calculate the present value and regular payments of each type of annuity. Key details include that ordinary annuity payments are made at the end of each interval, annuity due payments are made at the beginning of each interval, and deferred annuity payments begin at a later time.
This document provides an introduction and syllabus for an engineering economics course taught by Dr. Mohsin Siddique. It outlines the course details including the instructor's contact information, course goals and objectives, topics to be covered, assessment criteria, textbook information, and tentative schedule. The course aims to provide engineering students with the basic concepts of engineering economics to aid in decision making for engineering projects. Key topics include cost estimation, interest calculation, present worth analysis, rate of return analysis, and depreciation. Students will be assessed through quizzes, exams, assignments, and a final exam.
This document discusses using the homotopy perturbation method to solve integral equations. It begins by introducing the homotopy perturbation method and how it can be used to find approximate solutions to problems by considering the solution as a sum of an infinite series. It then shows how to apply the method to solve Fredholm and Volterra integral equations of the second kind by constructing a homotopy and obtaining iteration formulas. The document concludes that the homotopy perturbation method provides sufficient conditions for the convergence of solutions to integral equations and integro-differential equations.
This document provides an overview of engineering economics. It discusses how engineers apply economic principles to make cost-effective decisions when developing solutions to practical problems. Engineering economics involves analyzing cash flows, costs, benefits, and other factors over time to evaluate alternative projects and designs. The concepts of time value of money, interest, cash flows, and economic analysis allow engineers to maximize the efficient use of resources in their decision making.
This document provides an overview of engineering economics topics that may be covered on the Fundamentals of Engineering (FE) exam, including time value of money concepts like present and future value, annuities, gradients, cash flows, and interest rates. It gives examples of engineering economics problems and solutions related to these concepts. It also discusses depreciation methods, inflation, bonds, and other relevant financial analysis approaches.
After watching this ppt you will get answers of the questions like...
1) What does it mean?
2) What we study in calculus?
3) Who invented it?
4) What was the need to invent it?
and many more...
You will also learn about the basic difference between discrete and continuous.
And many real life and cool applications of calculus....
1. Construction Methods and Project Management Introduction.pdfAikaterineSmith
The document discusses the key steps and roles in construction project management. It begins by outlining the typical project management steps of definition, scope, budgeting, planning, scheduling, tracking, and close out. It then defines a project in terms of its scope, budget, and schedule. Quality must also be balanced. The roles of owner, designer, and contractor are described. Finally, it lists several professional organizations related to construction project management.
The document discusses an experiment conducted on a propped cantilever beam subjected to various point loads. Experimental data was collected and used to calculate beam reactions and fixed end moments using the superposition method. Percentage errors between theoretical and experimental values were also calculated using provided formulas. While most experimental values differed significantly from theoretical predictions, the data could still be used to determine beam reactions and moments.
This document discusses nominal and effective interest rates and how to calculate them. It defines nominal interest rates as rates stated over a period less than a year, like 1% per month, while effective rates account for the time value of money and compounding frequency. To calculate the effective rate from the nominal rate, the formula is the nominal rate divided by the number of compounding periods. The document provides examples of calculating effective rates from nominal rates stated as percentages per month or quarter. It also addresses calculating effective rates for payment periods equal to or longer than compounding periods.
This document provides information about simple and compound interest topics taught in a Business Mathematics course. It defines simple and compound interest, provides formulas to calculate each, and gives examples of problems solved for both. The objectives are to understand the concepts, calculate simple and compound interest, and apply the concepts to real-life situations. Students are expected to understand the difference between simple and compound interest and solve related problems. The beneficiaries of understanding these topics are those receiving or paying interest on loans, savings, or investments.
This document discusses arithmetic and geometric gradient cash flows. It defines arithmetic gradient cash flows as those that increase or decrease by a constant amount each period, called the gradient. It provides formulas to calculate the present value (P) of arithmetic gradient cash flows using the gradient (G) and arithmetic gradient factors. It also discusses determining unknown interest rates and number of periods from single-payment and uniform-series cash flows using formulas, tables, and Excel functions.
This document provides an overview of present worth analysis for evaluating competing project alternatives. It discusses how to apply the present worth method to alternatives with equal, unequal, and infinite project lives. Examples are provided to illustrate how to calculate the present worth of each alternative's cash flows and compare their net present worth values to select the optimal choice. The document also covers how to compare multiple alternatives by computing the net present worth for each and choosing the one with the highest value.
This document provides information on engineering economics concepts related to cash flow, discount factors, equivalence, nonannual compounding, comparison of alternatives, depreciation, tax considerations, bonds, break-even analysis, inflation, and additional examples. Some key points include:
- Cash flow diagrams present cash flows as arrows on a timeline scaled to the magnitude of the cash flow. Expenses are down arrows and receipts are up arrows.
- Present worth, future worth, annual worth, and uniform gradient factors are used to convert between cash flows occurring at different times.
- Nonannual interest rates are converted to effective annual rates for analysis.
- Alternatives are compared using present worth, capitalized costs,
Application of Gauss,Green and Stokes TheoremSamiul Ehsan
Gauss' law, Stokes' theorem, and Green's theorem are used to relate line integrals, surface integrals, and volume integrals. Gauss' law relates the electric flux through a closed surface to the enclosed charge. Stokes' theorem converts a line integral around a closed curve into a surface integral over the enclosed surface. Green's theorem converts a line integral around a closed curve into a double integral over the enclosed area. These theorems have applications in electrostatics, electrodynamics, calculating mass and momentum, and deriving Kepler's laws of planetary motion.
1. Radian measure relates the angle measure to the arc length intercepted by the angle on a circle of radius r. If the arc length is equal to r, the angle measure is 1 radian.
2. To use formulas for arc length and area of a sector, the angle measure must be in radians. The document provides conversions between degrees and radians and examples of using the arc length and area formulas.
3. The key ideas are that radian measure relates the angle to arc length on a circle, and formulas require the angle be in radians rather than degrees. Examples show converting between degrees and radians and using the formulas.
This document discusses using the homotopy perturbation method to solve integral equations. It begins by introducing the homotopy perturbation method and how it can be used to find approximate solutions to problems by considering the solution as a sum of an infinite series. It then shows how to apply the method to solve Fredholm and Volterra integral equations of the second kind by constructing a homotopy and obtaining iteration formulas. The document concludes that the homotopy perturbation method provides sufficient conditions for the convergence of solutions to integral equations and integro-differential equations.
This document defines and provides examples of different types of differential equations. It discusses ordinary differential equations that depend on one independent variable and partial differential equations that depend on two or more variables. It also defines linear and nonlinear differential equations, homogeneous and non-homogeneous equations, and describes solutions including general, particular, and singular solutions. Applications of differential equations discussed include physics, geometry, exponential growth, exponential decay, and Newton's law of cooling.
This document discusses integration in mathematics. It defines integration as the process opposite to differentiation, where integration finds the direct relationship between two variables given their rate of change. Several techniques for integration are described, including integration by parts and substitution. The document outlines the history of integration and its applications in fields like engineering, business, and its use in estimating important values.
This document contains solutions to practice exam questions on topics including net present value calculations, true/false questions, interest rate calculations, equipment replacement analysis, and straight-line depreciation. Key details include:
1) A lease is preferable to a purchase if the annual lease fee is less than $4,086.20 based on an NPV analysis.
2) 240 rpm is identified as the most economical production speed based on a cost per jack analysis for different machine speeds.
3) A loan with a stated interest rate of 34.8% per year effectively has an APR of 41% based on monthly compounding calculations.
4) Alternative 1 is chosen over Alternative 2 for equipment
This document discusses using the homotopy perturbation method to solve integral equations. It begins by introducing the homotopy perturbation method and how it can be used to find approximate solutions to problems by considering the solution as a sum of an infinite series. It then shows how to apply the method to solve Fredholm and Volterra integral equations of the second kind by constructing a homotopy and obtaining iteration formulas. The document concludes that the homotopy perturbation method provides sufficient conditions for the convergence of solutions to integral equations and integro-differential equations.
This document provides an overview of engineering economics. It discusses how engineers apply economic principles to make cost-effective decisions when developing solutions to practical problems. Engineering economics involves analyzing cash flows, costs, benefits, and other factors over time to evaluate alternative projects and designs. The concepts of time value of money, interest, cash flows, and economic analysis allow engineers to maximize the efficient use of resources in their decision making.
This document provides an overview of engineering economics topics that may be covered on the Fundamentals of Engineering (FE) exam, including time value of money concepts like present and future value, annuities, gradients, cash flows, and interest rates. It gives examples of engineering economics problems and solutions related to these concepts. It also discusses depreciation methods, inflation, bonds, and other relevant financial analysis approaches.
After watching this ppt you will get answers of the questions like...
1) What does it mean?
2) What we study in calculus?
3) Who invented it?
4) What was the need to invent it?
and many more...
You will also learn about the basic difference between discrete and continuous.
And many real life and cool applications of calculus....
1. Construction Methods and Project Management Introduction.pdfAikaterineSmith
The document discusses the key steps and roles in construction project management. It begins by outlining the typical project management steps of definition, scope, budgeting, planning, scheduling, tracking, and close out. It then defines a project in terms of its scope, budget, and schedule. Quality must also be balanced. The roles of owner, designer, and contractor are described. Finally, it lists several professional organizations related to construction project management.
The document discusses an experiment conducted on a propped cantilever beam subjected to various point loads. Experimental data was collected and used to calculate beam reactions and fixed end moments using the superposition method. Percentage errors between theoretical and experimental values were also calculated using provided formulas. While most experimental values differed significantly from theoretical predictions, the data could still be used to determine beam reactions and moments.
This document discusses nominal and effective interest rates and how to calculate them. It defines nominal interest rates as rates stated over a period less than a year, like 1% per month, while effective rates account for the time value of money and compounding frequency. To calculate the effective rate from the nominal rate, the formula is the nominal rate divided by the number of compounding periods. The document provides examples of calculating effective rates from nominal rates stated as percentages per month or quarter. It also addresses calculating effective rates for payment periods equal to or longer than compounding periods.
This document provides information about simple and compound interest topics taught in a Business Mathematics course. It defines simple and compound interest, provides formulas to calculate each, and gives examples of problems solved for both. The objectives are to understand the concepts, calculate simple and compound interest, and apply the concepts to real-life situations. Students are expected to understand the difference between simple and compound interest and solve related problems. The beneficiaries of understanding these topics are those receiving or paying interest on loans, savings, or investments.
This document discusses arithmetic and geometric gradient cash flows. It defines arithmetic gradient cash flows as those that increase or decrease by a constant amount each period, called the gradient. It provides formulas to calculate the present value (P) of arithmetic gradient cash flows using the gradient (G) and arithmetic gradient factors. It also discusses determining unknown interest rates and number of periods from single-payment and uniform-series cash flows using formulas, tables, and Excel functions.
This document provides an overview of present worth analysis for evaluating competing project alternatives. It discusses how to apply the present worth method to alternatives with equal, unequal, and infinite project lives. Examples are provided to illustrate how to calculate the present worth of each alternative's cash flows and compare their net present worth values to select the optimal choice. The document also covers how to compare multiple alternatives by computing the net present worth for each and choosing the one with the highest value.
This document provides information on engineering economics concepts related to cash flow, discount factors, equivalence, nonannual compounding, comparison of alternatives, depreciation, tax considerations, bonds, break-even analysis, inflation, and additional examples. Some key points include:
- Cash flow diagrams present cash flows as arrows on a timeline scaled to the magnitude of the cash flow. Expenses are down arrows and receipts are up arrows.
- Present worth, future worth, annual worth, and uniform gradient factors are used to convert between cash flows occurring at different times.
- Nonannual interest rates are converted to effective annual rates for analysis.
- Alternatives are compared using present worth, capitalized costs,
Application of Gauss,Green and Stokes TheoremSamiul Ehsan
Gauss' law, Stokes' theorem, and Green's theorem are used to relate line integrals, surface integrals, and volume integrals. Gauss' law relates the electric flux through a closed surface to the enclosed charge. Stokes' theorem converts a line integral around a closed curve into a surface integral over the enclosed surface. Green's theorem converts a line integral around a closed curve into a double integral over the enclosed area. These theorems have applications in electrostatics, electrodynamics, calculating mass and momentum, and deriving Kepler's laws of planetary motion.
1. Radian measure relates the angle measure to the arc length intercepted by the angle on a circle of radius r. If the arc length is equal to r, the angle measure is 1 radian.
2. To use formulas for arc length and area of a sector, the angle measure must be in radians. The document provides conversions between degrees and radians and examples of using the arc length and area formulas.
3. The key ideas are that radian measure relates the angle to arc length on a circle, and formulas require the angle be in radians rather than degrees. Examples show converting between degrees and radians and using the formulas.
This document discusses using the homotopy perturbation method to solve integral equations. It begins by introducing the homotopy perturbation method and how it can be used to find approximate solutions to problems by considering the solution as a sum of an infinite series. It then shows how to apply the method to solve Fredholm and Volterra integral equations of the second kind by constructing a homotopy and obtaining iteration formulas. The document concludes that the homotopy perturbation method provides sufficient conditions for the convergence of solutions to integral equations and integro-differential equations.
This document defines and provides examples of different types of differential equations. It discusses ordinary differential equations that depend on one independent variable and partial differential equations that depend on two or more variables. It also defines linear and nonlinear differential equations, homogeneous and non-homogeneous equations, and describes solutions including general, particular, and singular solutions. Applications of differential equations discussed include physics, geometry, exponential growth, exponential decay, and Newton's law of cooling.
This document discusses integration in mathematics. It defines integration as the process opposite to differentiation, where integration finds the direct relationship between two variables given their rate of change. Several techniques for integration are described, including integration by parts and substitution. The document outlines the history of integration and its applications in fields like engineering, business, and its use in estimating important values.
This document contains solutions to practice exam questions on topics including net present value calculations, true/false questions, interest rate calculations, equipment replacement analysis, and straight-line depreciation. Key details include:
1) A lease is preferable to a purchase if the annual lease fee is less than $4,086.20 based on an NPV analysis.
2) 240 rpm is identified as the most economical production speed based on a cost per jack analysis for different machine speeds.
3) A loan with a stated interest rate of 34.8% per year effectively has an APR of 41% based on monthly compounding calculations.
4) Alternative 1 is chosen over Alternative 2 for equipment
Engineering economics Slides for Postgraduatesssuser50050d1
Engineering management involves applying engineering knowledge and judgment to develop solutions that utilize natural resources for the benefit of humanity. There are physical and economic environments to consider. The engineering process includes determining objectives and strategies, proposing solutions, evaluating proposals, and assisting with decision making. Engineering economy deals with analyzing the costs and benefits of projects over time. It is used to evaluate which projects are worthwhile and how projects should be designed and prioritized. Manufacturing costs include direct materials, direct labor, and manufacturing overhead. Prime costs refer to direct materials and labor, while factory costs also include factory overheads.
Principles of engineering economics, concept on Micro and macro analysis, problem solving and decision making
concept of simple and compound interest,interest formula for: single payment, equal payment and uniform gradient series.Nominal and effective interest rates, deferred annuities, capitalized cost.Present worth, annual equivalent , capitalized and rate of return methods , Minimum Cost analysis and break even analysis
Engineering economy is the analysis and evaluation of factors that will affect the economic success of engineering projects to recommend the best use of capital. It examines alternatives from a consistent viewpoint using monetary units, considering all relevant criteria like costs, benefits, risks and uncertainties. The principles of engineering economy guide developing alternatives, focusing on differences, using consistent units of measure, and revisiting decisions. Money-time relationships like interest, present worth, and future worth are key concepts in engineering economy analysis.
This document introduces the key principles of engineering economy. It discusses 7 principles: 1) Develop alternatives, 2) Focus on differences between alternatives, 3) Use a consistent viewpoint, 4) Use a common unit of measure, 5) Consider all relevant criteria, 6) Make risk and uncertainty explicit, and 7) Revisit decisions. The purpose of engineering economy is to evaluate the economic merits of proposed solutions and determine if their benefits outweigh their costs from the perspective of the decision maker. An understanding of these principles provides the foundation for engineering economic analysis.
Introduction to Engineering Economy is about engineering economy &The technological and social environments in which we live continue to change at a rapid rate.
In recent decades, advances in science and engineering have transformed our transportation systems, revolutionized the practice of medicine, and miniaturized electronic circuits so that a computer can be placed on a semiconductor chip.
This document provides an introduction to the concepts of engineering economics and engineering. It defines engineering economics as the application of economic principles to the evaluation of design and engineering alternatives. Some key points covered include:
- Engineering economics involves formulating, estimating, and evaluating economic outcomes of alternatives using mathematical relationships to compare cash flows. It must deal with risk and uncertainty.
- The time value of money is a central concept, dealing with how the value of money changes over time due to factors like investment opportunities and inflation. Interest rates and discount rates are used to relate amounts over different time periods.
- Engineering economics helps engineers make good decisions by assessing alternatives in economic terms and identifying the most efficient solution based on costs, benefits
This document provides an overview of key concepts in engineering economy. It discusses:
1) Why engineering economy is important for engineers to make sound economic decisions when designing and selecting between alternatives.
2) The time value of money concept and how money has more value the sooner it is received.
3) The general steps engineers should follow in decision making processes, including understanding the problem, identifying alternatives, and selecting the best option.
4) Key terms used in engineering economy like interest, interest rates, cash flows, economic equivalence, and the difference between simple and compound interest calculations.
Engineering economy is important for engineers to incorporate economic analysis into their work when making design decisions that often involve selecting from multiple alternatives. It allows them to understand concepts like time value of money, economic equivalence, and cost estimation. Engineering economy helps engineers answer economic questions about alternatives, formulate, estimate, and evaluate expected outcomes to select the best option. It uses measures like present worth, future worth, rate of return, and payback period along with time value of money concepts. The process involves understanding the problem, identifying alternatives, criteria for decision making, evaluating alternatives, selecting the best, implementing, and monitoring results.
This presentation covers the two processes that fall under the Initiating Process Group
1. Develop Project charter
2. Identify Stakeholders
Additionally, it covers the ITTO of the processes
Engineering economy is important for engineers to incorporate economic analysis into their design decisions. It allows engineers to evaluate multiple alternatives and select the best option. Key concepts in engineering economy include time value of money, equivalence, cost estimation, and analyzing decisions like whether a company should buy or rent a cement mixer based on measures of worth, present/future worth, payback period, and rate of return. Cash flows are also important to engineering decisions and involve constructing timelines that show the inflows and outflows of money over time in order to calculate net cash flow for each period.
Managerial economics applies microeconomic and macroeconomic theories to business decision-making. It helps managers understand market conditions, competition, and the business environment. Managerial economics provides analytical models, methods, and frameworks to analyze operational issues like pricing, production levels, and new investments from a microeconomic perspective. It also helps analyze macroeconomic factors like economic growth, interest rates, and government policies that shape the business environment. Key economic concepts used in managerial decision-making include incremental costs and revenues, discounting, opportunity costs, and equi-marginal utility.
The document summarizes key concepts from Chapter 11 of the textbook "Investment Analysis and Portfolio Management" regarding security valuation. It discusses the two major approaches to valuation - discounted cash flow and relative valuation. For discounted cash flow, it covers the dividend discount model (DDM) and its assumptions of constant growth. It also discusses how to value bonds, preferred stock, and common stock using these approaches. The key inputs of growth rates and discount rates are also addressed.
project selection
Non-numeric models
Sacred cow
Operating necessity
competitive necessity
Competitive Benefit model
non numeric models
Payback period
Net present value
scoring
The document discusses product life cycle and life cycle costing. It defines product life cycle as describing the advancement of products through identifiable stages of existence, including introductory, growth, maturity, and decline stages. It then explains life cycle costing as aggregating all costs incurred over the lifespan of an asset or project, including initial investment, operating costs, maintenance, repairs, and upgrades. The purpose is to help management decide whether to proceed with a project by analyzing total cost of ownership.
The document provides an overview of engineering economics concepts including cash flow diagrams, time value of money, equivalence, and economic analysis methods like present worth analysis and rate of return analysis. It discusses how cash flows are depicted visually over time in diagrams and how compound interest formulas are used to calculate future and present values when evaluating projects. Examples are given for present worth analysis of a dump truck purchase and calculating rate of return on an initial investment.
The document provides details about lesson 4 of chapter 3 on project management processes. It discusses the five process groups in project management - initiation, planning, executing, monitoring and controlling, and closing. It also covers common process interactions and defines key terms like project information, work performance data and reports. Finally, it lists various economic criteria used for selecting projects, including benefit cost ratio, cash flow, internal rate of return, present value, return on investment and opportunity cost.
What Lessons Can New Investors Learn from Newman Leech’s Success?Newman Leech
Newman Leech's success in the real estate industry is based on key lessons and principles, offering practical advice for new investors and serving as a blueprint for building a successful career.
Budgeting as a Control Tool in Government Accounting in Nigeria
Being a Paper Presented at the Nigerian Maritime Administration and Safety Agency (NIMASA) Budget Office Staff at Sojourner Hotel, GRA, Ikeja Lagos on Saturday 8th June, 2024.
Navigating Your Financial Future: Comprehensive Planning with Mike Baumannmikebaumannfinancial
Learn how financial planner Mike Baumann helps individuals and families articulate their financial aspirations and develop tailored plans. This presentation delves into budgeting, investment strategies, retirement planning, tax optimization, and the importance of ongoing plan adjustments.
13 Jun 24 ILC Retirement Income Summit - slides.pptxILC- UK
ILC's Retirement Income Summit was hosted by M&G and supported by Canada Life. The event brought together key policymakers, influencers and experts to help identify policy priorities for the next Government and ensure more of us have access to a decent income in retirement.
Contributors included:
Jo Blanden, Professor in Economics, University of Surrey
Clive Bolton, CEO, Life Insurance M&G Plc
Jim Boyd, CEO, Equity Release Council
Molly Broome, Economist, Resolution Foundation
Nida Broughton, Co-Director of Economic Policy, Behavioural Insights Team
Jonathan Cribb, Associate Director and Head of Retirement, Savings, and Ageing, Institute for Fiscal Studies
Joanna Elson CBE, Chief Executive Officer, Independent Age
Tom Evans, Managing Director of Retirement, Canada Life
Steve Groves, Chair, Key Retirement Group
Tish Hanifan, Founder and Joint Chair of the Society of Later life Advisers
Sue Lewis, ILC Trustee
Siobhan Lough, Senior Consultant, Hymans Robertson
Mick McAteer, Co-Director, The Financial Inclusion Centre
Stuart McDonald MBE, Head of Longevity and Democratic Insights, LCP
Anusha Mittal, Managing Director, Individual Life and Pensions, M&G Life
Shelley Morris, Senior Project Manager, Living Pension, Living Wage Foundation
Sarah O'Grady, Journalist
Will Sherlock, Head of External Relations, M&G Plc
Daniela Silcock, Head of Policy Research, Pensions Policy Institute
David Sinclair, Chief Executive, ILC
Jordi Skilbeck, Senior Policy Advisor, Pensions and Lifetime Savings Association
Rt Hon Sir Stephen Timms, former Chair, Work & Pensions Committee
Nigel Waterson, ILC Trustee
Jackie Wells, Strategy and Policy Consultant, ILC Strategic Advisory Board
“Amidst Tempered Optimism” Main economic trends in May 2024 based on the results of the New Monthly Enterprises Survey, #NRES
On 12 June 2024 the Institute for Economic Research and Policy Consulting (IER) held an online event “Economic Trends from a Business Perspective (May 2024)”.
During the event, the results of the 25-th monthly survey of business executives “Ukrainian Business during the war”, which was conducted in May 2024, were presented.
The field stage of the 25-th wave lasted from May 20 to May 31, 2024. In May, 532 companies were surveyed.
The enterprise managers compared the work results in May 2024 with April, assessed the indicators at the time of the survey (May 2024), and gave forecasts for the next two, three, or six months, depending on the question. In certain issues (where indicated), the work results were compared with the pre-war period (before February 24, 2022).
✅ More survey results in the presentation.
✅ Video presentation: https://youtu.be/4ZvsSKd1MzE
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
KYC Compliance: A Cornerstone of Global Crypto Regulatory FrameworksAny kyc Account
This presentation explores the pivotal role of KYC compliance in shaping and enforcing global regulations within the dynamic landscape of cryptocurrencies. Dive into the intricate connection between KYC practices and the evolving legal frameworks governing the crypto industry.
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Monthly Market Risk Update: June 2024 [SlideShare]Commonwealth
Markets rallied in May, with all three major U.S. equity indices up for the month, said Sam Millette, director of fixed income, in his latest Market Risk Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
2. 1.1 Engineering Economics: Description and role
in decision making
• Engineering economy involves formulating,
estimating, and evaluating the expected economic
outcomes of alternatives designed to accomplish a
defined purpose.
• Mathematical techniques simplify the economic
evaluation of alternatives.
3. 1.1 Engineering Economics: Description and role
in decision making. Cont’d
• Besides applications to projects in your future jobs, what you
learn in this course may well offer you an economic analysis
tool for making personal decisions such as car purchases,
house purchases, major purchases on credit, e.g., furniture,
appliances, and electronics.
• The time frame of engineering economy is primarily the
future.
Therefore, the numbers used in engineering economy are
best estimates of what is expected to occur .
4. 1.1 Engineering Economics: Description and role
in decision making. Cont’d
• The estimates and the decision usually involve four
essential elements:
1.Cash flows
2. Times of occurrence of cash flows
3. Interest rates for time value of money
4. Measure of economic worth for selecting an
alternative.
5. 1.1 Engineering Economics: Description and role
in decision making. Cont’d
• The criterion used to select an alternative in engineering
economy for a specific set of estimates is called a measure of
worth . The measures developed and used are:
• Present worth (PW)
• Future worth (FW)
• Annual worth (AW)
• Rate of return (ROR)
• Benefit /cost (B/C)
• Capitalized cost (CC)
6. 1.1 Engineering Economics: Description and role
in decision making. Cont’d
• It is a well-known fact that money makes money. The time value of
money explains the change in the amount of money over time for
funds that are owned (invested) or owed (borrowed).
• This is the most important concept in engineering economy.
• The time value of money is very obvious in the world of economics.
If we decide to invest capital (money) in a project today, we
inherently expect to have more money in the future than we
invested. If we borrow money today, in one form or another, we
expect to return the original amount plus some additional amount
of money.
7. 1.2 Performing an Engineering Economy Study
• The steps in an engineering economy study are as follows:
1. Identify and understand the problem; identify the objective of
the project.
2. Collect relevant and available data.
3. Make realistic cash flow estimates.
4. Identify an economic measure of worth criterion for decision
making.
5. Evaluate each alternative; consider non economic factors.
6. Select the best alternative.
7. Implement the solution and monitor the results.
8. 1.2 Performing an Engineering Economy Study
Cont’d.
• Selection of the Best Alternative:
The measure of worth is a primary basis for selecting the best
economic alternative. For example,
if alternative A has a rate of return (ROR) of 15.2% per year and
alternative B will result in an ROR of 16.9% per year, B is better
economically.
However, there can always be noneconomic or intangible factors
that must be considered and that may alter the decision.
9. 1.2 Performing an Engineering Economy Study
Cont’d.
• There are many possible noneconomic factors;
some typical ones are:
• Availability of certain resources, e.g., skilled
labor force, water, power, tax incentives.
• Government laws that dictate safety, environmental,
legal, or other aspects
• Corporate management’s or the board of director’s
interest in a particular alternative.
10. 1.2 Performing an Engineering Economy Study
Cont’d.
• Once all the economic, noneconomic, and risk factors have
been evaluated, a final decision of the “best” alternative is
made.
• At times, only one viable alternative is identified. In this case,
the do-nothing (DN) alternative may be chosen provided the
measure of worth and other factors result in the alternative
being a poor choice.
The do-nothing alternative maintains the status quo.
11. 1.3 Professional Ethics and Economic Decisions
• Universal or common morals:
These are fundamental moral beliefs held by virtually all
people.
Most people agree that to steal, murder, lie, or physically
harm someone is wrong.
• Individual or personal morals:
These are the moral beliefs that a person has and maintains
over time. These usually parallel the common morals in that
stealing, lying, murdering, etc. are immoral acts.
12. 1.3 Professional Ethics and Economic Decisions
Cont’d.
• Professional or engineering ethics
Professionals in a specific discipline are guided in their
decision making and performance of work activities by a
formal standard or code.
The code states the commonly accepted standards of
honesty and integrity that each individual is expected
to demonstrate in her or his practice.
There are codes of ethics for medical doctors, attorneys,
and, of course, engineers.
13. 1.3 Professional Ethics and Economic Decisions
Cont’d.
• The Code of Ethics for Engineers have direct or
indirect economic and financial impact upon the
designs, actions, and decisions that engineers make
in their professional dealings.
• Here are three examples from the Code:
(Next Slide)
14. 1.3 Professional Ethics and Economic Decisions
Cont’d.
• “Engineers, in the fulfillment of their duties, shall hold
paramount the safety, health, and welfare of the
public .”
• “Engineers shall not accept financial or other considerations ,
including free engineering designs, from material or equipment
suppliers for specifying their product.”
• “Engineers using designs supplied by a client recognize that the
designs remain the property of the client and may not be
duplicated by the engineer for others without express
permission.”
15. 1.4 Interest Rate and Rate of Return
• Interest is the manifestation of the time value of money.
• Computationally, interest is the difference between an ending
amount of money and the beginning amount. If the difference is
zero or negative, there is no interest.
• There are always two perspectives to an amount of interest—
interest paid and interest earned. Interest is paid when a person or
organization borrowed money (obtained a loan) and repays a larger
amount over time. Interest is earned when a person or organization
saved, invested, or lent money and obtains a return of a larger
amount over time.
• The numerical values and formulas used are the same for both
perspectives, but the interpretations are different.
16. 1.4 Interest Rate and Rate of Return. Cont’d
• Interest paid on borrowed funds (a loan) is determined using the original amount, also called the
principal,
Interest = amount owed now - principal
• When interest paid over a specific time unit is expressed as a percentage of the principal, the result
is called the interest rate.
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑅𝑎𝑡𝑒 (%) =
interest accrued per time unit
principal
x 100%
• The time unit of the rate is called the interest period. By far the most common interest period used
to state an interest rate is 1 year. Shorter time periods can be used, such as 1% per month.
• Thus, the interest period of the interest rate should always be included. If only the rate is stated,
for example, 8.5%, a 1-year interest period is assumed.
17. 1.4 Interest Rate and Rate of Return. Cont’d
• Example 1
An employee at LaserKinetics.com borrows $10,000 on May 1 and must
repay a total of $10,700 exactly 1 year later. Determine the interest
amount and the interest rate paid.
Solution:
Interest paid = $10,700 - 10,000 = $700
The interest rate paid for 1 year.
• Percent interest rate =
$700
$10,000
x100% = 7% per year
18. 1.4 Interest Rate and Rate of Return. Cont’d
• Example 2:
Stereophonics, Inc., plans to borrow $20,000 from a bank for
1 year at 9% interest for new recording equipment.
Compute the interest and the total amount due after 1 year
Solution:
Interest accrued: $20,000(0.09) = $1800
The total amount due is the sum of principal and interest.
Total due = $20,000 + 1800 = $21,800
19. 1.4 Interest Rate and Rate of Return. Cont’d
• From the perspective of a saver, a lender, or an investor, interest earned is the final amount minus
the initial amount, or principal.
Interest earned = total amount now - principal
• Interest earned over a specific period of time is expressed as a percentage of the original amount
and is called rate of return (ROR).
• The time unit for rate of return is called the interest period, just as for the borrower’s perspective.
Again, the most common period is 1 year.
• The term return on investment (ROI) is used equivalently with ROR in different industries and
settings, especially where large capital funds are committed to engineering-oriented programs.
• The numerical values in the % Equations are the same, but the term interest rate paid
is more appropriate for the borrower’s perspective, while the rate of return earned is better for
the investor’s perspective.
20. 1.4 Interest Rate and Rate of Return. Cont’d
• Example 3:
(a) Calculate the amount deposited 1 year ago to have $1000 now at an interest rate of 5%
per year.
(b) Calculate the amount of interest earned during this time period.
• Solution
(a) The total amount accrued ($1000) is the sum of the original deposit and the earned
interest.
If X is the original deposit,
Total accrued = deposit + deposit(interest rate)
$1000 = X + X (0.05) = X (1 + 0.05) = 1.05 X
The original deposit is
X = 1000 /1.05= $952.38
(b) interest earned = $1000 - 952.38 = $47.62
21. 1.5 Terminology and Symbols
• The equations and procedures of engineering economy utilize the following terms
and symbols.
Sample units are indicated.
P = value or amount of money at a time designated as the present or time 0.
Also P is referred to as present worth (PW), present value (PV), net present
value (NPV), and capitalized cost (CC); monetary units, such as dollars.
F = value or amount of money at some future time. Also F is called future worth
(FW) and future value (FV); dollars
A = Series of consecutive, equal, end-of-period amounts of money.
Also A is called the annual worth (AW) and equivalent uniform annual worth
(EUAW); dollars per year, euros per month
n = number of interest periods; years, months, days
i = interest rate per time period; percent per year, percent per month
t = time, stated in periods; years, months, days
22. 1.5 Terminology and Symbols Cont’d
• The symbols P and F represent one-time occurrences.
• A occurs with the same value in each interest period for a specified number of periods.
• It should be clear that a present value P represents a single sum of money at some time prior to a
future value F or prior to the first occurrence of an equivalent series amount A
• It is important to note that the symbol A always represents a uniform amount (i.e., the same
amount each period) that extends through consecutive interest periods. Both conditions must exist
before the series can be represented by A
• The interest rate i is expressed in percent per interest period, for example, 12% per year. Unless
stated otherwise, assume that the rate applies throughout the entire n years or interest periods.
The decimal equivalent for i is always used in formulas and equations in engineering economy
computations.
• All engineering economy problems involve the element of time expressed as n and interest rate i .
In general, every problem will involve at least four of the symbols P , F , A , n , and i , with at least
three of them estimated or known.
23. 1.5 Terminology and Symbols Cont’d
• Example 1 :
Today, Julie borrowed $5000 to purchase furniture for her new house. She can repay the
loan in either of the two ways described below.
Determine the engineering economy symbols and their value for each option.
(a ) Five equal annual installments with interest based on 5% per year.
(b ) One payment 3 years from now with interest based on 7% per year.
Solution:
(a ) The repayment schedule requires an equivalent annual amount A,
which is unknown.
P = $5000 i = 5% per year n = 5 years A = ?
(b ) Repayment requires a single future amount F , which is unknown.
P = $5000 i = 7% per year n = 3 years F ?
24. 1.5 Terminology and Symbols Cont’d
• Example 2:
You plan to make a lump-sum deposit of $5000 now into an
investment account that pays 6% per year, and you plan to
withdraw an equal end-of-year amount of $1000 for 5 years,
starting next year. At the end of the sixth year, you plan to close
your account by withdrawing the remaining money.
Define the engineering economy symbols involved.
• Solution
All five symbols are present, but the future value in year 6 is the unknown.
P = $5000
A = $1000 per year for 5 years
F = ? at end of year 6
i = 6% per year
n = 5 years for the A series and 6 for the F value
25. 1.5 Terminology and Symbols Cont’d
• Example 3:
Last year Jane’s grandmother offered to put enough money into a savings account to generate $5000 in
interest this year to help pay Jane’s expenses at college. ( a ) Identify the symbols, and ( b ) calculate the
amount that had to be deposited exactly 1 year ago to earn $5000 in interest now, if the rate of return is
6% per year.
Solution
(a ) Symbols P (last year is - 1) and F (this year) are needed.
P ?
i = 6% per year
n = 1 year
F = P + interest = ? + $5000
(b ) Let F = total amount now and P = original amount. We know that F – P = $5000 is accrued interest.
Now we can determine P .
F = P + Pi
The $5000 interest can be expressed as
Interest = F – P = ( P + Pi ) – P= Pi
$5000 = P (0.06)
P = $5000 /0.06 = $83,333.33
26. 1.6 Cash Flows: Estimation and Diagramming
• Engineering economy bases its computations on the timing, size,
and direction of cash flows.
• Cash inflows are the receipts, revenues, incomes, and savings
generated by project and business activity.
A plus sign indicates a cash inflow.
• Cash outflows are costs, disbursements, expenses, and taxes
caused by projects and business activity.
A negative or minus sign indicates a cash outflow. When a project
involves only costs, the minus sign may be omitted for some
techniques, such as benefit/cost analysis.
27. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• Net cash flow = cash inflows - cash outflows
NCF = R – D
where NCF is net cash flow, R is receipts, and D is disbursements.
• At the beginning of this section, the timing, size, and direction of cash
flows were mentioned as important. Because cash flows may take place at
any time during an interest period, as a matter of convention, all cash
flows are assumed to occur at the end of an interest period.
• The end-of-period convention means that all cash inflows and all cash
outflows are assumed to take place at the end of the interest period in
which they actually occur.
When several inflows and outflows occur within the same period,
the net cash flow is assumed to occur at the end of period.
29. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• Remember, end of the period means end of interest period,
not end of calendar year.
• Cash flow diagram time t = 0 is the present, and t = 1 is the
end of time period 1. We assume that the periods are in years
for now. The time scale of Figure 1–4 is set up for 5 years.
Since the end-of-year convention places cash flows at the
ends of years, the “1” marks the end of year 1.
• The direction of the arrows on the diagram is important to
differentiate income from outgo. A vertical arrow pointing up
indicates a positive cash flow. Conversely, a down-pointing
arrow indicates a negative cash flow.
30. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• The interest rate is also indicated on the diagram.
Figure 1–5 illustrates a cash inflow at the end of year 1, equal
cash outflows at the end of years 2 and 3, an interest rate of
4% per year, and the unknown future value F after 5 years.
31. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• Before the diagramming of cash flows, a perspective
point must be determined so that + or – signs can be
assigned and the economic analysis performed correctly.
Assume you borrow $8500 from a bank today to
purchase an $8000 used car for cash next week, and you
plan to spend the remaining $500 on a new paint job for
the car two weeks from now.
• There are several perspectives possible when developing
the cash flow diagram—those of the borrower
(that’s you), the banker, the car dealer, or the paint shop
owner.
34. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• Example 1:
• Each year Exxon-Mobil expends large amounts of funds for mechanical safety features
throughout its worldwide operations. Carla Ramos, a lead engineer for Mexico and Central
American operations, plans expenditures of $1 million now and each of the next 4 years just
for the improvement of field-based pressure-release valves. Construct the cash flow diagram to
find the equivalent value of these expenditures at the end of year 4, using a cost of capital
estimate for safety-related funds of 12% per year.
• Solution
Figure 1–7 indicates the uniform and negative cash flow series (expenditures) for five periods,
and the unknown F value (positive cash flow equivalent) at exactly the same time as the fifth
expenditure. Since the expenditures start immediately, the first $1 million is shown at time 0,
not time 1. Therefore, the last negative cash flow occurs at the end of the fourth year, when F
also occurs. To make this diagram have a full 5 years on the time scale, the addition of the
year - 1 completes the diagram. This addition demonstrates that year 0 is the end-of-period point
for the year - 1.
36. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• Example 2:
An electrical engineer wants to deposit an amount P now
such that she can withdraw an equal annual amount of
A1 = $2000 per year for the first 5 years, starting 1 year after
the deposit, and a different annual withdrawal of A2 = $3000
per year for the following 3 years.
How would the cash flow diagram appear if i = 8.5% per year?
37. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• The cash flows are shown in Figure 1–8. The negative cash
outflow P occurs now. The withdrawals (positive cash
inflow) for the A1 series occur at the end of years 1 through
5, and A2 occurs in years 6 through 8.
38. 1.6 Cash Flows: Estimation and Diagramming
Cont’d.
• EXAMPLE 3:
A rental company spent $2500 on a new air compressor 7 years ago. The annual
rental income from the compressor has been $750. The $100 spent on
maintenance the first year has increased each year by $25.
The company plans to sell the compressor at the end of next year for $150.
Construct the cash flow diagram from the company’s perspective and indicate
where the present worth now is located.
39. 1.8 Simple and Compound Interest
• The terms interest, interest period, and interest rate are useful in calculating
equivalent sums of money for one interest period in the past and one period in
the future. However, for more than one interest period, the terms simple interest
and compound interest become important.
• Simple interest is calculated using the principal only, ignoring any interest accrued
in preceding interest periods.
The total simple interest over several periods is computed as
where I is the amount of interest earned or paid and the interest rate i
is expressed in decimal form.