Lecture_13.1_Engineering_Economics - AE309 Lecture 13.1...

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AE309 Lecture 13.1 Engineering Economics Reference: Lindeburg, Engineering Economic Analysis Notations Engineering Economics - What is it? o Choosing the best design outcome o Outcomes are evaluated in dollars o Good is defined as positive monetary value o May not be the only basis of decision unless all outcomes are anticipated and monetized Goal: o Be able to evaluate economic options taking into consideration the time value of money To meet this goal: o Calculate an effective interest rate o Understand and develop cash flow diagrams o Know the methods for evaluating alternatives o Understand the impact of taxes & depreciation Value of Money o “Value” is not synonymous with “amount” o The value of an amount of money depends on when amount is spent or received. o The difference between the anticipated amount and its current value is called ____________________ o Interest is expressed as ____________________ Time Value of Money o Utilization of money over time has value.
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