Class 12 Basic
Evaluation Methods
ISE 2014
Click to edit Master subtitle style
Fall 2011
Test Feedback
As a class you did well good job!
Weve been getting great participation in
office hours this semester, hopefully it
helped
Ill have my office hours toda
Nominal and effective interest rates.
More often than not, the time between successive
compounding, or the interest period, is less than
one year (e.g., daily, monthly, quarterly).
The annual rate is known as a nominal rate.
A nominal rate of 12%, comp
Bill Mitselfik loves sailing, so much so that he plans to purchase an 80 foot schooner 10 years from now. Bill plans to keep the boat, after the
purchase, for 15 years (at which point he will donate it to charityzero income ignoring taxes). He will use th
Problem 4-81
EOY
5
6
7
15
18
19
20
21
Cash flow
A
A
A
i=
A=
P @ EOY 15
P @ EOY 17
A
$2,100
$2,450
$2,800
$3,150
$486.50
$7,678.66
$8,791.30
7.00%
per year
Problem 4-84
i=
Insulation cost
0%
$100,000
npv of e savings
$313,458.01
Energy Savings
since greate
Table 4-1
Three plans for repayment of $17,000 in 4 months with interest @ 1% per month
Month
Amount owed
at beginning
of month
Interest
accrued
for month
Total money
owed at
end of month
Principal
payment
Total
end-of-month
payment (cash flow)
Plan 1: Pa
Simple interest: rarely exists,
Say you have $100 and get 5% per year
-105 after 1yr
-after yr 2 $110
-after 3 $115
-interest on original amount
PxIxN
Compound interest: earn on total amount(balance) each year not the original
-interest on the interest
Pr
Investments
for the Young
and Not Yet
Famous
Today's Topics
Financial Planning in general
Retirement Accumulation Accounts
Savings and other types of Bonds
Private Investment Accounts
EARN
PROTECT
GROW
Financial planning is
An organized method of achievin
Class 24 WACC
ISE 2014
Fall 2011
Admin
Hope everyone had a good break
Dr. Koelling will be here Wednesday to talk
about personal finance
Homework 9 also due Wednesday
Im still working on getting another guest
speaker for Monday Dec 5th
Well review Wednesd
Class 23 - ATCF
ISE 2014
Fall 2011
Todays Goal
Demonstrate the process of setting up an
ATCF table
Use the table to calculate EW of the ATCF
Work some example problems from the
book
Setting Up the Table
Page 316 in your text shows the format for
our ATCF
Class 13 - Bonds
ISE 2014
Fall 2011
Your Methods
PW Method
FW Method
AW Method
IRR Method
History of Bonds
Lets set the stage
Were going back to 14th century Italian
peninsula
At the time Italy as a nation did not exist, it
was a collection of powerful, i
Class 14 Bonds and
Alternatives
ISE 2014
Fall 2010
Your Methods
PW Method
FW Method
AW Method
IRR Method
Continuing with Bonds
Today were going to finish up Chapter 5
with some more example bond problems
Last class we learned how to solve for:
VN (purchas
Class 15 Equal Lives
Comparisons
ISE 2014
Fall 2011
Your Methods
PW Method
FW Method
AW Method
IRR Method
Review
So last class we introduced comparing
multiple alternatives
We have two types of decision
Investment Problems
Cost Problems
We have two types
Class 16 Incremental IRR
and Unequal Lives
ISE 2014
Fall 2011
Your Methods
Single Alternative
Multiple Alternatives
PW Method
PW Method
FW Method
FW Method
AW Method
AW Method
IRR Method
Incremental EW
Todays Class
Well cover incremental IRR Method
Well d
Class 17 Co-termination
ISE 2014
Fall 2011
Co-termination
Remember that we have two assumptions
for dealing with unequal lives
Last class we learned about repeatability
Today we learn about co-termination
Co-termination
With repeatability we keep the alte
Class 18 Capitalized
Worth and Payback
Analysis
ISE2014
Fall 2011
Your Methods
Single Alternative
Multiple Alternatives
PW Method
PW Method
FW Method
FW Method
AW Method
AW Method
IRR Method
Incremental EW
Incremental IRR
Todays Class
Our current methods
Class 19 - Depreciation
ISE 2014
Fall 2011
Course Roadmap
We started off with Chapter 4 how to
manipulate cash flows
We moved on to Chapters 5 and 6 how
to perform an analysis
Now were going to start Chapter 7
Depreciation and Taxes
Taxes
Well cover taxe
Class 20 DB Methods
ISE 2014
Fall 2011
Depreciation Methods
Last class we covered straight line and
units of production
Todays class well cover declining balance
and declining balance with a straight line
switchover
After exam 2 well cover MACRS
Declining
Class 21 MACRS
ISE 2014
Fall 2011
Exam 2
So what did you think?
Were going to take longer to grade this
one, no drop date deadline
Optimistically were going to get try to
make them available for return before
Thanksgiving break
No homework assignment this
Class 22 Taxes
ISE 2014
Fall 2011
Taxes
When making economic decisions, income
taxes are going to have an effect on our
decisions
Both state and federal taxes can apply to
our company
Before we jump into any problems, we
need to tweak our analysis framewo
ISE 2014 Engineering Econonomy Test 1 - andrewg6
problem #
1
final answer
$307
2
$348
3
$2,879
4
$2,198,562
5
$9,311
6
$34,746
7
8
(a)
$25,724
$37,859
(b) Yes
Place answer in yellow box
show work here
I=
8%
i=
10%
Difference in account balances
$307
ans
j