Engineering Economy Formula

ENGINEERING ECONOMY

                Simple Interest

Compound Interest

    

Continuous Compounding

ENGINEERING ECONOMY Rates of Interest:

Effective compounded continuously

Nominal  – compound interest

      

Effective – actual interest in one

year

  

ENGINEERING ECONOMY Ordinary Annuity  – payments at

Deferred Annuity  – first

end of each period

payment made later

                     

                     

ENGINEERING ECONOMY Annuity Due – payments at start Perpetuity  – payments extend

of each period

forever or continue indefinitely

                     

             

ENGINEERING ECONOMY

                                         

Capitalized Cost  – application of

perpetuity; sum of first cost and present worth of all future

payments which is assumed to continue forever

ENGINEERING ECONOMY Depreciation: Straight Line

Depreciation: Sinking Fund

Method  – cost of property varies Method  – imaginary fund called

linearly with time

sinking fund is invested yearly at

    

rate  to amount to

            

ENGINEERING ECONOMY Depreciation: Declining Balance Method  – constant percentage

or Matheson formula *k = 2/L for double DDB

   √     

     ̂      ( )   ̂ ̂ Declining Balance





Double Declining Balance

ENGINEERING ECONOMY Depreciation: SYD  – varies

Sum of Years Digit

                (  )  ̂   (  ) directly to number of years and inversely to SYD