Chapter 1 Foundations of Engineering Eco
Chapter 1 Foundations of Engineering Eco
Foundations Of
Engineering
Economy
Engineering Economy
7th edition
Leland Blank
Anthony Tarquin
1-1
Instructor Profile
Name: Najam ul Qadir
Office: DME Building 207
Email: [email protected]
Phone: 9085-6039
1. Role in decision
7. Economic equivalence
making
8. Simple and compound
2. Study approach
interest
3. Ethics and economics
9. Minimum attractive rate
4. Interest rate of return
5. Terms and symbols 10. Spreadsheet functions
6. Cash flows
1-17
Ethics – Different Levels
Universal morals or ethics – Fundamental
beliefs: stealing, lying, harming or murdering
another are wrong
Personal morals or ethics – Beliefs that an
individual has and maintains over time; how a
universal moral is interpreted and used by each
person
Professional or engineering ethics – Formal
standard or code that guides a person in work
activities and decision making
1-21
© 2012 by McGraw-Hill, New York, N.Y All Rights Reserved
Interest paid Interest earned
1-25
© 2012 by McGraw-Hill, New York, N.Y All Rights Reserved
Cash Flow Diagrams
Time
0 1 2 … … … n-1 n
One time
period
F = $100
Show the cash flows (to approximate scale)
0 1 2 … … … n-1 n
Cash flows are shown as directed arrows: + (up) for inflow
P = $-80
- (down) for outflow
1-26
© 2012 by McGraw-Hill, New York, N.Y All Rights Reserved
Cash Flow Diagram Example
Plot observed cash flows over last 8 years and estimated sale next
year for $150. Show present worth (P) arrow at present time, t = 0
$110
Year
0 1
Rate of return = 10% per year
$100 now
Simple Interest
Interest is calculated using principal only
Interest = (principal)(number of periods)(interest rate)
I = Pni
1-33
© 2012 by McGraw-Hill, New York, N.Y All Rights Reserved
MARR Characteristics