ENGR 1166 Chapter Notes - Chapter 8: Engineering Economics, Interest, Cash Flow
Chapter 8
Introduction to Engineering
Economics
Homework Review
Problems 6.1, 6.7, 6.8, 6.24 and 6.26�
Problem 7.2�Problem 7.3�Problem 7.5�Problem 7.15�Problem 7.21�Problem 7.23�
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Chapter Objectives
Understand that the value of money changes with time
Distinguish between simple and compound interest
Prepare a cash-flow diagram
Compute present worth and future worth of multiple
sums of money
Calculate the equivalent uniform annual cost of a series
of amounts
Recognize and solve problems involving sinking funds
and installment loans
Solve problems with arithmetic and geometric gradients
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Simple Interest
Interest on Principal only
..=..(1+....)
Where
F= Future worth
P = Principal amount
n = Number of interest periods
i= Interest rate per period (as a decimal, not as a percent)
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Document Summary
Understand that the value of money changes with time. Compute present worth and future worth of multiple sums of money. Calculate the equivalent uniform annual cost of a series of amounts. Recognize and solve problems involving sinking funds and installment loans. P = principal amount n = number of interest periods i= interest rate per period (as a decimal, not as a percent) Compute the value of 000 after 4 years with annual interest of 12% compounded monthly. The interval of time is normally given in months or years. 3. dependent on the point of view from which it is constructed: lender or borrower. Present worth (p): value of a monetary transaction at the current time. The amount of money that must be invested now in order to produce a prescribed sum at another date. Future worth (f): value of a monetary transaction at some point in the future.
