ENGINEERING ECONOMY

BASIC METHODS FOR MAKING ECONOMY

STUDIES AND COMPARING ALTERNATIVES
ENGINEERING ECONOMY
BASIC METHODS FOR MAKING ECONOMY STUDIES
Learning Objectives
At the end of the lesson, the learner is expected to:
 Determine the underlying basic principle relating to basic methods
for making economy studies.
 Evaluate project alternatives by applying engineering economic
principles and methods.
 Select the most appropriate method for economy studies.
ENGINEERING ECONOMY
BASIC METHODS FOR MAKING ECONOMY STUDIES
References:
The Great Problem Solver - Engineering Economy
Jaime R. Tiong
BSCE (Summa Cum Laude) UV
1st placer , PICE National Students’ quiz
Awardee, UV outstanding alumni Review Director, excel reviewer
center
Former University plant engineer ,UV
ENGINEERING ECONOMY
BASIC METHODS FOR MAKING ECONOMY STUDIES

TOPIC 7: METHODS FOR MAKING ECONOMY STUDIES

 Annual Cost Patterns
 Capital Cost
 Present Worth Cost Pattern
CONCEPTUAL EXERCISES:
 Solve the following problems:

1. At 6%, find the capitalized cost of a bridge whose cost is P250M and life
is 20 years, if the bridge must be partially rebuilt at a cost of P100M at
the end of each 20 years.

2. A company sets aside P 300,000 each year as a fund for expansion. If

the fund earns 9% compounded annually, determine how long will it take
before a building costing P 3, 000, 000 can be built?
CONCEPTUAL EXERCISES:
 Solve the following problems:

3. A sum of P1,000 is invested now and left for 8 years, at which time the
principal is withdrawn. The interest has an accrued left for another 8
years. If the effective annual interest is 5%, what will be the withdrawn
amount at the end of the 16th year?

4. An investment A cost $10,000 today and pays back $11,500 two years
from now. Investment B cost $8000 today and pays back $4500 each
year for two years. If an interest rate of 5% is used, which alternative is
superior?
CONCEPTUAL EXERCISES:
 Solve the following problems:

5. What is the capitalized cost of a public works project that will cost
$25,000,000 now and will require $2,000,000 in maintenance annually?
The effective annual interest rate is 12%.
THANK YOU!