{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Engineering%20Economics_CH4_PartI

Engineering%20Economics_CH4_PartI - = Engineering Economics...

Info icon This preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Engineering Economics Ch. 4 Money-Time Relationship and Equivalence - Part I - =
Image of page 1

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

View Full Document Right Arrow Icon
Review Chapter 1. Introduction – Engineering economics – 7 Principles of engineering economy Develop the alternatives Focus on the differences Use a consistent viewpoint Use a common unit of measure Consider all relevant criteria Make uncertainty explicit Revisit your decisions – Engineering economic analysis procedure – Overview of the textbook
Image of page 2
Review Chapter 2-Evaluating alternatives not in consideration of time value – Cost terminology Fixed, variable, incremental cost Direct, indirect, standard cost Cash, book cost Sunk, opportunity, life-cycle cost
Image of page 3

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

View Full Document Right Arrow Icon
Review Chapter. 2 – Price-demand relationship Assumptions: p = a – bD, p = constant etc. Total Revenue (TR) = p x D Find D1 maximizing TR Find D2 maximizing Profit (= TR – TC) Find D3 making breakeven (Profit = 0) – Cost-driven design optimization
Image of page 4
Review Present Economy Studies – Decision rules among alternatives (when time value of money is ignored) Rule1: Maximize overall profitability Rule2: Minimize total cost
Image of page 5

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

View Full Document Right Arrow Icon
Engineering Projects (EE, ME, CE, IE, BE,…) Alternatives (Profit/Revenue) -Single alternative: Ch.5 evaluating a single project - Multiple alternatives Ch.6 comparing multiple projects Cost: Time considerations -Interest: Ch.4 time value of money (Economic equivalence) -Depreciation: Ch.7 Depreciation Ch.1: Introduction Ch.2: cost/profit concept & evaluation Ch 3: cost estimation Analysis & Strategy Ch.8 price changes and exchange rates Ch.9 replacement Ch.10 – 14 others Economic environments Ch.7 taxes Ch.8 price changes and exchange rates Overview of engineering economics The time value of money is not a factor.
Image of page 6
Chapter 4. The Time value of Money
Image of page 7

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

View Full Document Right Arrow Icon
Time Value of Money – Earning Power A dollar today is worth more than a dollar a year from now because of interest . Given a cash flow, interest rates can be used to determine the time value of money.
Image of page 8
Simple vs. Compound Interests Simple Interest P : Principal amount. N : Number of interest periods (e.g., years). i : Interest rate per period Simple interest I earned or paid is given by: I = P N i. $1000 x 3 years x 10%/year = $300
Image of page 9

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

View Full Document Right Arrow Icon
Simple vs. Compound Interests Therefore if you invest an amount of P for N years at a rate of i % a year, after N years you will have: P + I = P + P N i = P ( 1 + N i ) Simple interest is not used frequently in modern commercial practice.
Image of page 10
Simple vs. Compound Interests Exercise 1 : A friend borrowed $500 from you at a simple interest rate of 9% per year for three years. What is the total amount of money your
Image of page 11

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

View Full Document Right Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern