Lecture_14.1_Engineering_Economics_III

Lecture_14.1_Engineering_Economics_III - AE309 Lecture 14.1...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
AE309 Lecture 14.1 Engineering Economics III Reference: Lindeburg, Engineering Economic Analysis Example 8: Uniform Series – Future Worth (Series Compound Amount) F/A You are planning to start your own business as a home builder and are currently setting aside $1500 a month in an investment with an annual effective return of 9.38%. Your current balance is $15,000. How much do you expect to have in this investment in 28 months. i es = (i e +1) 1/m -1 = ( + 1) - 1 = = % / month F a = P(F/P, i e ,n) Single Payment PW = ( ) (F/P, %, ) = $ a b
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
F b =A(F/A, i e ,n) Uniform Series Present Worth =( ) (F/A, %, ) = $ F = F a + F b F = + F = $ Present and Future Worth Analysis Method to compare alternatives Alternatives MUST have same analysis period Maximize Present Worth (PW) (or Future Worth): If PW<0, then you are losing money When reconciling useful lives and analysis periods… ……………………………………………………………………
Background image of page 2
Example 11: Present Worth Analysis PWA A contractor receives the following bids based on the payment schedule defined. Subcontractor Price Payment Schedule 1. Quick Paving Co. $85,000 50% payable immediately 25% payable in 6 months 25% payable at the end of one year 2. Tartan Paving Co. $82,000 Payable immediately 3. Faultless Paving Co. $84,000 25% payable immediately 75% payable in 6 months Which paving subcontractor should be selected assuming a 12% nominal interest rate compounded monthly? n = i% per …………. .. = P 1 = P 2 = P 3 =
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
PWA A B First Cost $ 5,300 $10,700 Uniform Annual Benefits $ 1,800 $ 2,100 Useful Life, in years 4 8 Interest rate of 10%. Which alternative should be selected?
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 11

Lecture_14.1_Engineering_Economics_III - AE309 Lecture 14.1...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online