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Engineering Economy and Management - Coggle Diagram
Engineering Economy
and Management
ENGINEERING ECONOMY :
General step for decision making process
1)understand the problem
2) collect relevant information
3) Define the set of feasible alternatives
4) identity criteria for decision making
5) evaluate the alternatives and apply sensitivity analysis
INTEREST AND INTEREST RATE
INTEREST-the manifestation of the time value of
money
INTEREST RATE-Interest paid over a time period
expressed as a percentage of principal
ETHICS DIFFERENT LEVELS
UNIVERSAL MORAL OR ETHICS
PERSONAL MORAL OR ETHICS
PROFESSIONAL OR ENGINEERING ETHICS
Application of economic principle and calculations to engineering problems.
HOW TIME AND INTEREST AFFECT MONEY
UNIFORM SIRIES INVOLVING F/A AND A/F
(2) Last cash flow occurs in
same period as F
(1) Cash flow occurs in
consecutive interest periods
FACTOR VALUES FOR UNTABULATED
USE FORMULA
USE SPREADSHEET FUNCTION CORRESPONDING WITH P,F OR A VALUE SET TO 1
LINEARLY INTERPOLATE IN INTEREST TABLE
ARIMETHIC GRADIENT
Arithmetic gradients
change by the same amount e ach period
G starts between periods 1 and 2
This is because flow in year 1 is usually not equally to G and is handled seperately as a base amount
Combining Factors
SHIFTED UNIFORM SERIES
SHIFTED SERIES AND RANDOM SINGLE
AMOUNTS
Uniform series procedures
are applied to the series amounts
Single amount formulas
are applied to the one time cash flows
A shifted uniform series starts at a time
other than period 1
SHIFTED ARITHMETIC GRADIENTS
Shifted gradient begins at a time other than between
periods 1 and 2
Present worth p is located 2 periods before gradient starts.
Must use multiple factor to find P in actual year
To find equivalent A siries, find P at actual time 0 and apply (A/P,i,n)
Present Worth Analysis
Economic Proposal
mutually alternatives exclusives
independent project
Cash flow estimates
revenue
cost
Two ways to compare equal service:
LEAST COMMON MULTIPLE ( LCM ) - Compare the PW of alternative over a period of time equal to (LCM) of their estimated lives
STUDY PERIOD : compare the PW of alternatives using a specified study period of n years