文档介绍：ENGINEERING ECONOMICS I
TO INVEST,
OR NOT TO INVEST,
THAT IS THE QUESTION .
(With apologies to William Shakespeare)
t Given one or more potential projects,
– how do we decide in which to invest, if any?
t What criteria do we use to evaluate potential projects?
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THE TWO BASIC INVESTMENT CONCERNS
uPROFITABILITY
(HOW MUCH MONEY WILL I MAKE?)
uRISK
(WHAT ARE MY CHANCES OF MAKING IT?)
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PROFITABILITY EVALUATION
t KEY to PROFITABLITY ANALYSIS
ð RETURN ON INVESTMENT
uKEY to RETURN ON INVESTMENT
ð TIME VALUE OF MONEY
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TIME VALUE OF MONEY I
SIMPLE INTEREST - SINGLE PAYMENT
t Example: $100 invested at 5% per annum
At beginning of Year 1, invest $100
At end of Year 1, receive ()(100) = $
At beginning of Year 2, leave the $100 on deposit
At end of Year 2, receive another $
And so on, as long as we leave the $100 on deposit.
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TIME VALUE OF MONEY II
COMPOUND INTEREST - SINGLE PAYMENT
t Example: $100 invested at 5% per annum
At beginning of Year 1, invest $100
At end of Year 1, add ()(100) = $
At beginning of Year 2, have $ on deposit
At end of Year 2, add ()() = $
At beginning of Year 3, have $ on deposit
At end of Year 3, add ()() = $
And so on.
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TIME VALUE OF MONEY III
COMPOUND INTEREST - MULTIPLE PAYMENTS
t Example: $100 invested initially at 5% per annum
At end of Year 1, have $ on deposit
Pay in another $200. Begin Year 2 with $
At end of Year 2, add ()() = $
Pay in another $300. Begin Year 3 with $.
At end of Year 3, add ()() = $.
Pay in $0. Begin Year 4 with $.
And so on..
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THE EQUATION OF MONEY
Let Q(n )= the amount of money available at the beginning
of the nth year
F(n)