ENGINEERING ECONOMICS LIST OF FORMULA

ACCOUNTING
Assets = Liabilities + Owner’s Equity
Assets = Liabilities + (Beginning Owner’s Equity + Revenue – Expenses)
Profit per day = Revenue per day − Cost per day

Simple Interest Compound Interest

I = Pni F = P(F/P, i%, n) = P(1 + i))
F=P+I
P = F(P/F, i%, n) = F(1 + i)&)
F = P + Pni !
Ordinary simple interest = 360 days Nominal rate of interest: i =
"
Exact simple interest: ! "
Effective rate of interest: EIR = F1 + H − 1 = (1 + i)" − 1
1 year = 365 days "

Leap year = 366 days

ANNUITY
ANNUITY Capitalized Cost
Ordinary Annuity
Case 1. No replacement, only maintenance and or operation every period
#&(#$!)"#
P = A(P⁄A , i%, n) = A @ A CC = First cost + Present worth of perpetual operation and or maintenance
!
! Case 2. Replacement only, no maintenance and or operation.
A = P(A⁄P , i%, n) = P @#&(#$!)"#A
(#$!)# &# CC = First cost + Present worth of perpetual replacement
F = A(F/A, i%, n) = A @ A !
!
A = S(A⁄F , i%, k) = S @(#$!)!&#A
!
A = F(A⁄F , i%, n) = F @(#$!)#&#A ' ( !
P= = ! @(#$!)!&#A
!
Deferred Annuity
Case 3. Replacement, maintenance and or operation every period
ANNUITY
P = A(P⁄A , i%, n)(P⁄F , i%, m)
#&(#$!)"# Uniform Arithmetic Gradient
P = A @ !
A (1 + i)&+
P = P' + P* = A(P/A, i%, n) + G(P/G, i%, n)
F = A(F⁄A , i%, n)(F⁄P , i%, m)
1 − (1 + i )&)
F = A@
(#$!)# &#
A (1 + i)+ P' = A(P/A, i%, n) = A F H
! i
Perpetuity G (1 + i )) − 1 1
P* = (P/G, i%, n) = F − nH I J
# & (#$! )"# # & (#$! )"$ ' i i (1 + i ))
P = A @ !
A = A@ !
A = !
BASIC ECONOMY STUDY METHODS
Rate of return (ROR)
-./ '))012 3456!/
ROR =
7)8.9/+.)/
Net Annual Profit or Savings = Annual Income – Annual Expenses
Annual Worth (AW) Method
MRP = Investment × MARR
Net AW = Annual Income or Savings – Annual Expenses – MRP
Present Worth (PW) Method
Net PW = PW:19; !)625< − PW:19; 50/625<
Future Worth (FW) Method
Net FW = FW:19; !)625< − FW:19; 50/625<
Payback or Payout Period Method
7)8.9/+.)/& (1281=. >120.
Payback Period =
-./ '))012 ?19;625<
Internal Rate of Return (IRR) Method

𝑁𝑃𝑊 = 0 = PWcash inflow − FWcash outflow

External Rate of Return (ERR) Method
- -

X EL (P⁄F , ∈ %, k)(F⁄P , i′%, N) = X R L (F⁄P , ∈ %, N − k)

LMN LMN
ENGINEERING ECONOMICS LIST OF FORMULA