Engineering Economy (Reviewer) Flashcards
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
the amount of money paid for the use of borrowed capital
The income earned by money which has been loaned
Interest
Calculated using the principal only, ignoring any interest that
had been accrued in preceding interest periods
Simple Interest
computed on the basis of 12 months of 30 days each or 360 days a year (1 interest period = 360 days)
Ordinary Simple Interest
computed on the basis of exact number of days in a year: 365 days for ordinary year or 366 days for leap year (1 interest period = 365 or 366 days)
Exact Simple Interest
Simple graphical representation of cash flows drawn on a time scale
Cash Flow Diagram
Interest on top of interest
Compound Interest
specifies the rate of interest and the number of interest period/s in one year
Nominal Rate of Interest
actual rate of interest on the principal for one year
Effective Rate of Interest
of several future cash payments maybe defined as the sum
of the values of the future payments discounted at a given rate for the corresponding periods to the present.
Present Worth
is obtained by setting the sum of the values on a certain comparison or focal date of one set of obligations equal to the sum of the values on the same date of another set of obligations
Equation of Values
It is assumed that cash payments occur once per year, but, compounding is continuous throughout the year.
Continuous Compounding
the difference between the present worth and the worth at some time in the future.
Discount
the discount on one unit principal for one unit of time.
Rate of Discount
It is a series of equal payments made at equal intervals of time.
Annuity
