709 views

Uploaded by mhsheikh

This is a small booklet that contains formulae those can be used in Engineering Economy

- Hydraulic and Pneumatic Basics - 1
- frenzel
- Mock Board Examination in Electronics b
- Engineering Economy
- Engineering Economy
- Engineering Economy
- Problem Bank Make File Physics121 Solns
- LOGIC DESIGNING AND SWITCHING THEORY BOOK
- Engineering Economy Chapter 1x
- Engineering Economy
- Engineering Economy Interest Tables
- engineering economy
- Blake
- Engineering Economy
- Engineering Economy Formula Sheet
- General Health Issues
- ECE Reviewer 001
- 39026245 Blake Electronic Communication
- Thermo Notes
- Prudental Regulations

You are on page 1of 7

Supplementary Material for Students

Formulae for Problem Solving in Engineering Economy

IE 255 (Engineering Economy) is a three credit hours core course being offered each semester by

the Faculty of Engineering King Abdulaziz University Jeddah – Saudi Arabia. In an effort to

help the students who take this course, the faculty members group (who teach IE 255 course)

prepare and update the supplementary material for students on ‘as and when required’ basis. The

current version of ‘Formulae for Problem Solving in Engineering Economy’ is the latest version

that is updated in Spring Semester 2010.

We hope that this supplementary material for the students of IE 255 Engineering Economy

course will prove to be a time saver in solving engineering economy problems.

Dr. Manzoor Hussain Sheikh

Members / Instructors

Mr. Muhammad Rehan Maqbool

Mr. Abubakar Razzaq Abubakar Ishak

Mr. Mohammed Abdullah AlHarkan

Mr. Syed Wasiul Hasan Rizvi

Formulae for IE 255 (Engineering Economy)

Table of Contents

Formulae For Discrete Cash Flows with End Of Period Compounding ...................................................... 3

Interest and Interest Rate ......................................................................................................................... 4

Factors: How Time and Interest Affect Money ........................................................................................ 4

Nominal and Effective Interest Rate Statements....................................................................................... 4

Present Worth Analysis ........................................................................................................................... 4

Annual Worth Analysis ........................................................................................................................... 4

Rate of Return Analysis........................................................................................................................... 5

Benefit / Cost Analysis and Public Sector Projects................................................................................... 5

Breakeven Analysis................................................................................................................................. 5

Discounted Payback Period Analysis ....................................................................................................... 5

No-return Payback Period Analysis ......................................................................................................... 5

Replacement and Retention Decisions ..................................................................................................... 6

Depreciation Methods - Straight Line (SL) Method ................................................................................. 6

Depreciation Methods - Declining Balance (DB) & DDB Methods .......................................................... 6

Effects of Inflation ................................................................................................................................... 7

Formulae for IE 255 (Engineering Economy)

Compounding

Single F/P F = P (F/P,i,n) F = P(1+i)n

Amount Single-payment

compound amount

P/F P = F (P/F,i,n) P = F/(1+i)n

Single-payment

present worth

Uniform P/A P = A (P/A,i,n) (1 i ) n 1

Uniform-series P A n

Series i(1 i)

present worth

A/P A = P (A/P,i,n) i(1 i) n

Capital Recovery A P

(1 i ) 1

n

A/F A = F (A/F,i,n) i

Sinking Fund AF

(1 i) 1

n

F /A F = A (F/A,i,n) (1 i) n 1

Uniform-series F A

compound amount i

Arithmetic F of Arithmetic

- 1 (1 i ) n 1

Gradient F G n

Gradient

Compound Amount i i

G 1 i 1 n

P/G PG= G (P/G,i,n) n

Arithmetic gradient P

i i 1 i n (1 i ) n

present worth

A/G AG=G(A/G,i,n) 1 n

Annual worth of AG

i (1 i ) 1

n

gradient

Geometric Geometric gradient 1 g n

Gradient present worth (Pg) 1

1 i

P A1 when g i

ig

n

P A1

1 i when g = i

Formulae for IE 255 (Engineering Economy)

1. Interest = end amount – original amount

௧௦௧௨ௗ௧ ௨௧

2. Interest rate or rate of return = ௨௧

x 100

3. In (Simple Interest) = (principal) (number of periods) (interest rate) = P x n x i

4. In case of simple interest future worth after n periods = Fn = P + In = P + Pni = P(1+ni)

5. Compound Interest = (principal + all accrued interest)(interest rate)

6. In case of compound interest future worth after n periods = F = P(1+i)n

7. Net cash flow = receipts – disbursements = cash inflows – cash outflows

1. Finding cash flow in year k of an arithmetic gradient:

a. CFk = base amount + (k – 1) G

2. Finding cash flow in year k of a geometric gradient:

a. Ak = A1 (1+g) k-1

3. For more factors please refer to table 1 (on page 3).

1. Nominal interest rate ( r ) = interest rate per period x number of periods

ݎΨݐ݀݅ݎ݁݁ ݉݅ݐݎ݁ r

2. Effective rate per compounding period = ݊= ݐݎ݁݀݅ݎ݁݃݊݅݀݊ݑ ݂݉ܿݎܾ݁ ݉ݑ m

m

r

3. Effective interest rate = ieff = 1 1

m

4. For continuous compounding ieff = er-1

(ௗ௩௨)ሺௗ௨௧ሻ

1. Periodic interest payments or bond dividends = ୠ

ୡ

=

୬୳୫ ୠୣ୰୭୮ୟ୷୫ ୣ୬୲ୱ୮ୣ୰୷ୣୟ୰

2. CC = A/i = AW / i

1. CR = -P(A/P,i,n) + S(A/F,i,n) = -(P – S)(A/P,i,n) –S(i)

2. AW = CR + A of AOC

3. AW = CC(i) = Pi (AW of a permanent investment)

Formulae for IE 255 (Engineering Economy)

0 = -PWDisbursements + PWReceipts

௧௦ି௦௧௦ ିୈ

1. B/C = ௦௧௦

=

େ

௧௦ି௦௧௦ିெ Ƭை௦௧௦

2. ϐȀ ൌ ௧௩௦௧ ௧

3. Benefit and cost difference = B – C where C = (cost + disbenefit)

Breakeven Analysis

1. Profit (or loss) = Revenue (R) – Total Cost (TC) = rQ – [FC + vQ]

2. TC = VC (variable cost) + FC (fixed cost)

FC

QBE

3. r v

ୋ୴୕

4. Average cost per unit Cu = ቂ ୕

ቃ

t np

1. 0 P NCFt ( P , i, t ) (When NCF values are different)

t 1

F

t n p

1. 0 P NCFt (When NCF values are different)

t 1

P

2. n p (When NCF values are same)

NCF

Formulae for IE 255 (Engineering Economy)

1. Total AW = -capital recovery – AW of annual operating costs = -CR –AW of AOC

2. CRk P A , i, k Sk A , i, k

P F

3. (AW of AOC)k = AOC1 P , i,1 AOC2 P , i, 2 ...... AOCk P , i, k A , i, k

F F F P

BS

1. Depreciation charge (D)for year t Dt ( B S )d

n

2. Book value (BV) after t years of service BVt B tDt

3. Depreciation or recovery rate (d) d = dt = 1/n

2. Depreciation charge (D)for year t Dt = (d)BVt-1 = dB(1-d)t-1

3. Book value after t years of service BVt = B(1-d)t

The actual depreciation rate (d) for year

4. dt = d(1-d)t-1

t relative to first cost

5. Implied S = BVn= B(1-d)n

1

S n

6. implied d 1

B

Formulae for IE 255 (Engineering Economy)

Effects of Inflation

Dollars in period t2

1. Dollar in periodt

1 Inflation rate between t1 and t2

Future Dollars

2. CV dollars

(1 f ) n

n

- Hydraulic and Pneumatic Basics - 1Uploaded byAlly Yap
- frenzelUploaded byJessica Jung
- Mock Board Examination in Electronics bUploaded byJessa Suñga
- Engineering EconomyUploaded byBurn-Man Hiruma Villanueva
- Engineering EconomyUploaded byNorm
- Engineering EconomyUploaded byxxkooonxx
- Problem Bank Make File Physics121 SolnsUploaded byyudipurwanto
- LOGIC DESIGNING AND SWITCHING THEORY BOOKUploaded byAli Shan Rao
- Engineering Economy Chapter 1xUploaded byalfasel
- Engineering EconomyUploaded byErrol John Reyes
- Engineering Economy Interest TablesUploaded byMike Serquina
- engineering economyUploaded byFaten Nabilla Nordin
- BlakeUploaded byJERUEL
- Engineering EconomyUploaded byjm131
- Engineering Economy Formula SheetUploaded byLusash1
- General Health IssuesUploaded byMariam Sal.
- ECE Reviewer 001Uploaded bymrgreen0024
- 39026245 Blake Electronic CommunicationUploaded byCzarinaJoyceCoz
- Thermo NotesUploaded byNick Decillo
- Prudental RegulationsUploaded byNaeem Uddin
- Engineering Economics by PaneersrelvamUploaded byDeepak Ramu
- Engineering Economy Sample Problem SolutionsUploaded byAaRichard Manalo
- Engineering Economy QuestionsUploaded byJE Genobili
- Age Character CalculationUploaded byKhalid Azeem
- Elecs RefresherUploaded bymario sanchez
- Design Guidelines MultifamilyUploaded byHESuarez
- Power Plant EngineeringUploaded byAmitava Dutta
- Economics(AF and FA, PG and AG.chp#2)Uploaded byapi-26367767
- Frenzel Q & AUploaded byChris Lloyd Junio
- GEAS 1Uploaded byMariz-Elaine Noceja Rodriguez

- Raising the Minimum Wage: Misguided Policy Unintended ConsequencesUploaded byEstefania Duran
- Partnership Dissolution - DiscussionUploaded byIñego Begdorf
- wp82_2009Uploaded byRalph Andrew Chochlac
- Question Paper Unit 6 June 2014Uploaded bymrsundeeps
- Manual Cost Cultivation Surveys 23july08Uploaded bydushyantrocky
- February 14 Sylvester Johnson DEMAND LETTERUploaded byMary Cadei
- Mission Statement for TradersUploaded bybarber bob
- Chapter 18 SolutionsUploaded byMichael Cox
- Business StudiesUploaded byCarrie Aralis
- FPLUploaded byczx88
- Chase Loan Modification PacketUploaded bySince 1990 BK AND MOTIONS AT YAHOO COM
- Sales BudgetUploaded byGurdevinder Romana
- Ifrs 17 Pocket Guide on Reinsurance Contracts HeldUploaded bySergio D. Chavez
- CADMUploaded byArnab Sen
- Business Case EssentialsUploaded bySan He
- Project Report for Manufacturing UnitUploaded byPaul Martinez
- 198 Varet Street Setup FlyerUploaded byGothamSchools.org
- 2019 WMATA 101Uploaded byAnonymous sKgTCo2
- BBA Full Syllabus KUK by Rana, Vashishth, SinghUploaded byJames Rekinson
- Consolidation DiscussionUploaded byAndrei Vienne Perez
- GCC StrategyUploaded byAmedo Mosay
- Explain Price Risk and Its TypesUploaded byAmanpreet Formay
- ACCT 211 Individual Learning Project Study GuidesUploaded byJohn Liberty
- PSA-520 Identifying and Assessing Risks of Material MisstatementUploaded bycolleenyu
- outlinelecturenotes-jan2011-110119220147-phpapp02Uploaded byMoumita Maity
- BUSINESS PLANS.docxUploaded byARNOLD
- Chapter 08 Class Notes (1)Uploaded byBartholomew Szold
- Skyview ManorUploaded bySteffi Dcosta
- Buy Back of SharesUploaded byNaresh Patro
- Study Material Economic IndicatorsUploaded byठलुआ क्लब