FE Reference Pages

FE Reference Pages - 92 ENGINEERING ECONOMICS Factor Name...

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Unformatted text preview: 92 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 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 ..........Benefit 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 inflation 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 1 1 + = m e m r i 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 find 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 profit or other benefits of an investment to equal the cost of the investment. INFLATION To account for inflation, the dollars are deflated by the general inflation 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 . The formula for d is d = i + f + ( i f ) ENGINEERING ECONOMICS (continued) 93 DEPRECIATION Straight Line n S C D n j = Accelerated Cost Recovery System (ACRS ) D j = (factor) C A table of modified factors is provided below....
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FE Reference Pages - 92 ENGINEERING ECONOMICS Factor Name...

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