Ch 10 IT-390Engineering Economy

2 Engineering Economy n ROI or return-on-investment is required for project existence n “Time value of money” is applied to engineering decision making. n Engineering Economy - a collection of 6 mathematical techniques which simplify economic comparisons

3 Engineering Economy n Symbol Definitions u P = present amount or value u F = future amount or value u A = annuity u n = number of periods u i = interest rate

4 Engineering Economy n Equation 1 Find Future if Present is known SPCAF-Single Payment Compound Amount Formula P = 1000 F = ?

5 Engineering Economy n Equation 2 Find Present if Future is known SPPWF-Single Payment Present Worth Factor P = ? F = 1000

6 Engineering Economy n Equation 3 Find Series if Present is known CRF-Cost Recovery Factor P = 1000 A = ?

7 Engineering Economy n Equation 4 Find Present if Series is known USPWF-Uniform Series Present Worth Factor P = ? A = 1000

8 Engineering Economy n Equation 5 Find Series if Future is known SFF-Sinking Fund Factor A = ? F = 1000

9 Engineering Economy n Equation 6 Find Future if Series is known USCAF-Uniform Series Compound Amount Factor A = 1000 F = ?

10 Engineering Economy n To solve any Engineering Economy Problem, Follow these steps: Identify each term F_________P_________A_________n_________i__________ n Only four are needed to solve the problem. One will be unknown and one will be unused n Select the proper formula and plug in the three known to find the unknown