IT-390Engineering Economy

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IT-390 Engineering Economy
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Engineering Economy

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

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Engineering Economy

• Symbol Definitions
• P present amount or value
• F future amount or value
• A annuity
• n number of periods
• i interest rate

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Engineering Economy

• Equation 1
• Find Future if Present is known
• SPCAF - Single Payment Compound Amount Formula

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Engineering Economy

• Equation 2
• Find Present if Future is known
• SPPWF - Single Payment Present Worth Factor

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Engineering Economy

• Equation 3
• Find Series if Present is known
• CRF - Cost Recovery Factor

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Engineering Economy

• Equation 4
• Find Present if Series is known
• USPWF - Uniform Series Present Worth Factor

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Engineering Economy

• Equation 5
• Find Series if Future is known
• SFF - Sinking Fund Factor

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Engineering Economy

• Equation 6
• Find Future if Series is known
• USCAF - Uniform Series Compound Amount Factor

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Engineering Economy

• To solve any Engineering Economy Problem, Follow
  these steps
• Identify each term
• F_________
• P_________
• A_________
• n_________
• i__________
• Only four are needed to solve the problem. One
  will be unknown and one will be unused
• Select the proper formula and plug in the three
  known to find the unknown