Lecture 2

Lecture 2 - ISE 460: Engineering Economy University of...

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Unformatted text preview: ISE 460: Engineering Economy University of Southern California Fall 2010 Joseph Chow Week 1: Lecture 2 Announcement Recap Agree to DEN terms of service! There will not be any discussion/section for this first week. HW #1 deadline was postponed to 9/9/10 - it has been updated in the Lecture #1 slides. The HW #1.4 problems from the book are uploaded onto Course Documents as "HW #1 Handout.pdf". Importance of the textbook 10/12/10 2 Log In Demo 10/12/10 3 Recap from Last Class: Accounting Basics Balance Sheet Income Statement Cash Flow Statement 10/12/10 4 APPLICATION OF ACCOUNTING TO ENGINEERING ECONOMICS PROBLEMS A foreshadowing 10/12/10 5 10/12/10 6 Figure 10.2 A popular format used for presenting a cash flow statement. Tracking an Income Statement Over 5 Years 10/12/10 7 10/12/10 8 TABLE 10.2 (continued) Cash Flow Statement for the Automated Machining Center Project (Example 10.1) 10/12/10 9 Figure 10.3 Cash flow diagram (Example 10.1). TIME VALUE OF MONEY 10/12/10 10 Time Value of Money A nearby penny is worth a distant dollar Banks/lenders operate on this concept (they buy your present value dollars with future dollars plus interest) 10/12/10 11 Cash Flow Diagram 10/12/10 12 1 $100 $106 i = 6% Time (in discrete periods) Initial payment: principal A n = a discrete payment or receipt at end of a period i = interest rate per period N = total number of periods P = present sum at time 0 F = future sum at end of analysis period(s), also F...
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Lecture 2 - ISE 460: Engineering Economy University of...

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