17_engineering_economics

# 17_engineering_economics - ENGINEERING ECONOMICS Factor...

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114 ENGINEERING ECONOMICS ±ENGINEERING±±ECONOMICS Factor Name Converts Symbol Formula Single Payment Compound Amount to F given P ( F/P , i% , n ) (1 + i ) n Single Payment Present Worth to P given F ( P/F , i% , n ) (1 + i ) n Uniform Series Sinking Fund to A given F ( A/F , i% , n ) () 1 1− + n i i Capital Recovery to A given P ( A/P , i% , n ) 1 1 1 + + n n i i i Uniform Series Compound Amount to F given A ( F/A , i% , n ) i i n 1 + Uniform Series Present Worth to P given A ( P/A, i% , n ) n n i i i + + 1 1 1 Uniform Gradient Present Worth to P given G ( P/G , i% , n ) n n n i i n i i i + + + 1 1 1 1 2 Uniform Gradient † Future Worth to F given G ( F/G , i% , n ) i n i i n + 2 1 1 Uniform Gradient Uniform Series to A given G ( A/G , i% , n ) 1 1 1 + n i n i NOMENCLATURE AND DEFINITIONS A . ......... Uniform amount per interest period B . ......... Bene f t BV ........ Book value C . ......... Cost d ........... Combined interest rate per interest period D j ......... Depreciation in year j F . ......... Future worth, value, or amount f ........... General in F ation rate per interest period G .......... Uniform gradient amount per interest period i ........... Interest rate per interest period i e .......... Annual effective interest rate m .......... Number of compounding periods per year n ........... Number of compounding periods; or the expected life of an asset P . ......... Present worth, value, or amount r . .......... Nominal annual interest rate S n ......... Expected salvage value in year n Subscripts j ........... at time j n ........... at time n †........... F/G = ( F/A n ) / i = ( F/A ) × ( A/G ) ±NON-ANNUAL±COMPOUNDING i m r 11 e m =+ - bl BREAK-EVEN ANALYSIS By altering the value of any one of the variables in a situation, holding all of the other values constant, it is possible to f nd a value for that variable that makes the two alternatives equally economical. This value is the break-even point. Break-even analysis is used to describe the percentage of capacity of operation for a manufacturing plant at which income will just cover expenses. The payback period is the period of time required for the pro f t or other bene f ts of an investment to equal the cost of the investment. INFLATION To account for in F ation, the dollars are de F ated by the general in F ation rate per interest period f , and then they are shifted over the time scale using the interest rate per interest period i . Use a combined interest rate per interest period d for computing present worth values P and Net P .

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## 17_engineering_economics - ENGINEERING ECONOMICS Factor...

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