ENGINEERING ECONOMY CONCEPTS, Summaries of Engineering Economy

Download ENGINEERING ECONOMY CONCEPTS and more Summaries Engineering Economy in PDF only on Docsity!

ENGINEERING ECONOMY CONCEPTS

ENGINEERING ECONOMY CONCEPTS ENGINEERING ECONOMY GENERAL NOTES: 1 Default time is yearly or aiually unless specified t i awl where: capital/ presect worth FOR EXACT AND ORDINARY INTEREST: 96D) Eo DETERMINATION OF A LEAP YEAR sep ee sph eese 1. SIMPLE INTE! dleap year=366 days ay 1 ordinary year=365 days 4 FOR ORDINARY SIMPLE INTEREST: COMPOUND INTEREST/ COMMERCIAL INTEREST The diagram consists of a horizontal line with markers Pp iJ F ( 1 + i) —n at a series of time intervals, na Ht Flo | Compounding Guockely 7 r= nominal rate rominal m=compounding periods EFFECTIVE RATES st rates into different compounding periods r where: ER, = (1+ —)"-1 m ER. =effective rate at m periods r=nominal rate m=compounding eriods HOW TO CONVERT AN EFFECTIVE RATE INTO ANOTHER EFFECTIVE RATE WITH DIFFERENT COMPOUNDING TIME: -Equate the two effective rates INFLATION: ignifying a decline in the purchasing power of money 1+i)” popes (14+ f)" where: P=Principal n=time i=interest rate F=Future worth f=rate of inflation DISCOUNT -a deduction from the usual cost of something -typically given for prompt or advance payment F—P where: d 1 P=Principal TI FEF d=discount i=interest rate F-P d F=Future worth I I ANNUITY ¥ Apo pection -interest earning with equal deposits made at equal interval time Tht TH eran] He a to rv,= 4] 20 =| a i [ek v ash Fow Diagram of Ordnary Annuity esnunnioniaeaaas ORDINARY ANNUITY- Payment is made at end of each period 1 1 CALTECH: “|i i(d+i) E= oO