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2013 11 Engineering Economics

This document provides an introduction to engineering economic equations that safety professionals should understand. It begins by explaining why understanding engineering economics is important for professional certification exams and for making personal financial decisions. The presentation then outlines the key engineering economic equations, including the variables for future value, present value, amount, interest rate, and number of years. It provides example questions and works through applying the equations to calculate required values. The summary concludes by stating that the document introduces important engineering economic concepts and equations through example problems.

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pganoel
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61 views64 pages

2013 11 Engineering Economics

This document provides an introduction to engineering economic equations that safety professionals should understand. It begins by explaining why understanding engineering economics is important for professional certification exams and for making personal financial decisions. The presentation then outlines the key engineering economic equations, including the variables for future value, present value, amount, interest rate, and number of years. It provides example questions and works through applying the equations to calculate required values. The summary concludes by stating that the document introduces important engineering economic concepts and equations through example problems.

Uploaded by

pganoel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 64

The Engineering

Economic Equations
Every Safety Professional
Should Know
Presented By:
Jarred ODell, ASP
Safety Director
Syracuse Utilities

House Keeping
Please

Silence Cell Phones

House Keeping
Please

Silence Cell Phones

Sign-in

Sheet

House Keeping
Please

Silence Cell Phones

Sign-in

Sheet

Sleeping

during the

presentation

Why Engineering Economics


For those of you pursuing your CSP:
7

15 questions on the ASP Exam

15 questions on the CSP Exam

For everyone else:


Ever

buy a car or a house?

Who

has a credit card?

Engineering Economics

0-4

Engineering Economics

You do not
need an
app for
that!!!

Engineering Economics

Uff Da!
Uff da is an expression of
Norwegian origin adopted by
Scandinavian-Americans.
This exclamation is an
announcement that, that
person is going into a state
of sensory overload.

Uff Da!
If you find yourself going into
sensory overload and need
to ask a question say:

Uff Da!

Uff
Da!

Question: 1

Engineering Economics: Q1
A wealthy relative died and left you her
estate. You can choose to either accept
$6,000,000 today or wait and receive
$10,000,000 in five years. Assume the
annual interest rate over this period is
10%. You decide to

Engineering Economics: Q1
You decide to:
A)

Wait the 5 years

B)

B) Take the money and run

C)

Do nothing, its probably the same people


that brought you the Nigerian Lottery

Engineering Economics

Page 1

Engineering Economics
F = Future
P = Present
A = Amount of periodic receipt/payment
n = Number of years*
i = Annual Interest* expressed in decimal
form (e.g. 10% = .10)
Page 1

Engineering Economics

Page 1

Engineering Economics

Engineering Economics

Engineering Economics

Engineering Economics: Q1

= 10,000,000

= 6,000,000

= N/A

= 10% or 0.10

= 5 years

Page 2

Engineering Economics: Q1

= 6,000,000 (1+ 0.10)5

= 10,000,000(1+0.10)-5

Page 2

Question: 2

Engineering Economics: Q2
You decided to go back to school and eared
your Masters Degree in mathematics.
Having heard this,
your supervisor
throws this
scenario at you:

Engineering Economics: Q2
The chief financial officer of Widget Inc.
expects a 10% annual return on
investments for all capital projects. What is
the maximum cost that will be approved
from a project that is expected to save
$8,000 per year over 10 years? Assume
the project will be fully depreciated in the
10 years.
Question 2

Uff
Da!

Engineering Economics: Q2
F

= N/A

= ???

= $8,000

= 10% or 0.10

= 10 years

Page 3

Engineering Economics

Engineering Economics: Q3

Page 3

Question: 3

Engineering Economics: Q3
You recently obtained 6 Black Belt status.
Congratulations! Understandably, you are
very anxious to test out your new skills.
Soon you face this problem:

Engineering Economics: Q3
The financial policy of Acme requires that
capital investments must have an annual
return of 12%. An engineering solution to
a safety problem will cost $250,000 for the
initial installation, and it will cost $12,000
annually to maintain for 15 years. What is
the required annual savings from this
project in order for it to be approved?
Question 3

Engineering Economics: Q3
F

= N/A

= $250,000

= ???

= 12% or 0.12

= 10 years

Page 4

Engineering Economics

Engineering Economics: Q3

A=

Page 4

Question: 4

Engineering Economics: Q4
Having recently been conferred as a Doctor
in Safety and Engineering Science,
your are now in
a position to poses
this scenario to your
employer:

Engineering Economics: Q4
Your company decided to hire an EHS/6,
executive. If a balloon payment of
$10,000,000 is due in 10 years, what
amount would management have to
deposit monthly into a savings account
(paying interest of 6% per year) to
accumulate adequate funds to pay the
note?
Question 4

Engineering Economics: Q4
F

= $10,000,000

= N/A

= ???

= 6% or 0.06

= 10 years

Page 5

Engineering Economics

Engineering Economics

A=

Engineering Economics
F = Future
P = Present
A = Amount of periodic receipt/payment
n = Number of years*
i = Annual Interest* expressed in decimal
form (e.g. 10% = .10)
Page 1

Engineering Economics

A=

Question: 5

Engineering Economics: Q4
One of your faceless
pawns is having
trouble figuring out
the following
scenario. He
humbly/fearfully
asks for your help:

Engineering Economics: Q5
Calculate the monetary value after ten
years of a behavior based safety program
that costs $40,000 per year at the start.
Assume an inflation rate of 4.3%

Question 5

Engineering Economics: Q4
F

= ???

= N/A

= $40,000

= 4.3% or 0.043

= 10 years

Page 5

Engineering Economics

Engineering Economics: Q5

F=

Uff
Da!

Engineering Economics

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