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Note for Engineering Economics - EE By Dr Ako Rashed

  • Engineering Economics - EE
  • Note
  • Komar University of Science and Technology - KUST
  • Civil Engineering
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Dr Ako Rashed
Dr Ako Rashed
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Engineering Economy Chapter 1 Fall 2018 Dr. Ako Rashed Hama

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Engineering Economy Chap 1: Foundation of Engineering Economy Basic Terminology and Fundamental Concepts 1. Alternatives: Different solutions (approaches) >>> best economical one 2. Cash Flows: The estimated inflows (revenues) and outflows (costs ) of money 3. Alternative Selection: Inaction, do-nothing (DO), as-is, status quo >>> several solutions 4. Evaluation Criteria: Choosing the best alternative = the lowest cost (highest income) 5. Intangible (untouchable )Factors: unreal (noneconomic) = goodwill, friendship, morale 6. Time Value of Money: time is (makes) money! The change in the amount of money over a given time period The most important concept in engineering economy

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Engineering Economy Chap 1: Foundation of Engineering Economy Basic Terminology and Fundamental Concepts 7. Interest: rent paid for use of the money difference in an ending amount of money and the beginning amount positive  vs zero or negative  paid (borrow money, loan) vs earned (lend money, save) Interest = end amount (owed now) - original amount (principal) [1.1]

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Engineering Economy Chap 1: Foundation of Engineering Economy Basic Terminology and Fundamental Concepts 8. Interest Rate: interest rate or rate of return (ROR) = interest over a specific time unit in % 𝑅𝑅𝑅 = 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑝𝑝𝑝 𝑡𝑡𝑡𝑡 𝑢𝑢𝑢𝑢 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑎𝑎 (𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝) × 100% [1.2] normally % per year (annually), if not >>> must be mentioned! 9. Return On Investment (ROI): same as ROR dependent on the industry Interest rate paid (borrower) vs rate of return earned (investor)

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