Learning Objectives

Purpose: Understand the fundamental concepts of engineering economy.

This chapter will help you:

2. Decision making Determine the role of engineering economy in the decision-making process.

3. Study approach Identify what is needed to successfully perform an engineering economy study.

4. Interest rate Perform calculations about interest rates and rate of return.

5. Equivalence Understand what equivalence means in economic terms.

6. Simple and compound interest Calculate simple interest and compound interest for one or more interest periods.

7. Symbols Identify and use engineering economy terminology and symbols.

8. Spreadsheet functions Identify the Excel® spreadsheet functions commonly used to solve engineering economy problems.

9. Minimum Attractive Rate of Return Understand the meaning and use of Minimum Attractive Rate of Return (MARR).

10. Cash flows Understand cash flows, their estimation, and how to graphically represent them.

11. Doubling time Use the rule of 72 to estimate a compound interest rate or number of years for a present worth amount to double.

12. Spreadsheets Develop a spreadsheet that involves simple and compound interest, incorporating sensitivity analysis.