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Formulae for Engineering Economy

Formulae for Engineering Economy

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

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Published by: mhsheikh on Mar 25, 2010
Copyright:Attribution Non-commercial

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11/16/2012

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Formulae for IE 255 (Engineering Economy)
Available athttp://www.cyberspaceuniversity.net/ Page 1
IE 255 (Engineering Economy)Supplementary Material for StudentsFormulae for Problem Solving in Engineering Economy
IE 255 (Engineering Economy) is a three credit hours core course being offered each semester bythe Faculty of Engineering King Abdulaziz University Jeddah – Saudi Arabia. In an effort tohelp 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. Thecurrent version of ‘Formulae for Problem Solving in Engineering Economy’ is the latest versionthat is updated in Spring Semester 2010.We hope that this supplementary material for the students of IE 255 Engineering Economycourse will prove to be a time saver in solving engineering economy problems.The current members of this group are:
Course Coordinator / Instructor
Dr. Manzoor Hussain Sheikh
Members / Instructors
Mr. Muhammad Rehan MaqboolMr. Abubakar Razzaq Abubakar Ishak Mr. Mohammed Abdullah AlHarkanMr. Syed Wasiul Hasan Rizvi
 
Formulae for IE 255 (Engineering Economy)
Available athttp://www.cyberspaceuniversity.net/ Page 2
TableofContents
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
..........................................................6Effects of Inflation...................................................................................................................................7
 
Formulae for IE 255 (Engineering Economy)
Available athttp://www.cyberspaceuniversity.net/ Page 3
Table-1 FormulaeForDiscreteCashFlowswithEndOfPeriodCompounding
Type Find / Given Factor Relation Factor Formula
SingleAmount
F / PSingle-paymentcompound amountF = P (F/P,i,n) F = P(1+i)
n
P / FSingle-paymentpresent worthP = F (P/F,i,n) P = F/(1+i)
n
UniformSeries
P / AUniform-seriespresent worth
P = A (P/A,i,n)
(1 ) 1(1 )
nn
iP Ai i
A / PCapital RecoveryA = P (A/P,i,n)(1 )(1 ) 1
nn
i i A Pi
A/FSinking FundA = F (A/F,i,n)(1 ) 1
n
i A i
F /AUniform-seriescompound amountF = A (F/A,i,n)(1 ) 1
n
iF Ai
ArithmeticGradient
F of ArithmeticGradientCompound Amount
-
1 (1 ) 1
n
iF G ni i
P/GArithmetic gradientpresent worthP
G
= G (P/G,i,n)
1 1(1 )1
nnn
iG nPi ii i
A/GAnnual worth of gradientA
G
=G(A/G,i,n)1(1 ) 1
n
n A Gi i
GeometricGradient
Geometric gradientpresent worth (P
g
)
1
111
n
giP Ai g
when g
i
1
1
nP Ai
when g = i

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