ECON MALALA Flashcards
the analysis and evaluation of the factors that will affect
the economic success of engineering projects to the end that a recommendation can be
made which will ensure the best use of capital.
ENGINEERING ECONOMY
KW
- Econ SUCCESS OF ENG
the interest on a loan that is based only on the principal. Usually
used for short-term loans where the period is measured in days rather than years.
SIMPLE INTEREST
KW
- only on the principal
2 TYPES OF SIMPLE INTEREST
ORDINARY AD EXACT SI
Interest is computed on the basis of 12 months of 30 days
each which is equivalent to 360 days a year.
ordinary SI
360 days
interest is computed based on the exact number of days in a
given year which is 365 days for a normal year and 366 days during a leap year
Exact SI
Quantity of a certain commodity that is bought at a certain price at a given place and time
Demand
the interest deducted in advance
Discount
the discount on one unit of principal for one unit of time.
Rate of Discount
interest which is based on the principal plus the previous
accumulated interest.
Compound Interest
a graphical representation of cash flows drawn on a time scale
Cash flow diagram
the cost of borrowing money or the amount earned by a unit
principal per unit time.
Rate of Interest
2 types of rates of interest
– Nominal Rate of Interest
– Effective Rate of Interest
is the basic annual rate of interest. It specifies the rate of interest and the number of interest periods in one year.
NOMINAL RATE OF INTEREST –
is the actual or the exact rate of interest earned on the principal during a one-year period.
EFFECTIVE RATE OF INTEREST
based on the assumption that cash payments occur once
per year but compounding is continuous throughout the year.
Continuous Compounding
a series of equal payments occurring at equal interval of time.
Annuities
this type of annuity is one where the payments are made at the
end of each period beginning from the first period
Ordinary Annuity
this type of annuity is one where the first payment is made
several periods after the beginning of the annuity.
Deferred Annuity
is an annuity wherein the payments continue indefinitely.
PERPETUITY
The ______ of any property is the sum of its first cost and the present worth of all costs for replacement, operation, and maintenance for a long period or forever.
Capitaliized Cost
A series of disbursements or receipts that increases or decreases in each
succeeding period by a constant amount
Gradient
a financial security note issued by businesses or corporations and by the government as a means of borrowing long-term fund. It may also be defined as a long-term
note issued by the lender to the borrower stipulating the terms of repayment and other conditions.
BONDS
the value of a bond is the present worth of all future amounts that
are expected to be received through ownership of the bond.
Bond Value
the decrease in the value of a physical property with the passage of time.
DEPRECIATION
TYPES OF DEPRECIATION
Physical Depn
Functional Depn
A DEP’N method assumes that the loss in the value is
directly proportional to the age of the equipment or asset.
Straight line method
(Dep’n) in this method, it is assumed that a sinking fund is established in which funds will accumulate for replacement purposes.
Sinking Fund Method
(Dep’n) in this method, it is assumed that the annual cost of depreciation is a fixed percentage of the book value at the beginning of the year. This method is also called the constant percentage method or the Matheson Formula.
Declining Balance Method
this method assumes that the total depreciation that has taken place is directly proportional to the quantity of output of the property up to that time.
Service Output Method
_______ is the reduction of the value of a certain natural resource such as mines, oil, quarries, etc. due to the gradual extraction of its contents.
Depletion Cost
this is used in situations where the cost of two or more alternatives may be affected by a common variable.
Break-even Analysis
is the value of the variable for which the costs of the alternatives will be equal.
note: EQUAL
Break Even Point
this method is a measure of the effectiveness of an investment of capital.
RATE OF RETURN (ROR) METHOD
Sales volume at which the business will be able to pay exactly the desired rate of dvidend
Unhealthy point
