文档介绍：ENGINEERING ECONOMICS II
INVESTMENT ANALYSIS
panies (and individuals) invest money in order to
earn money
t Examples
ðBuild a factory to make washing machines and dryers
ðOpen a laundromat
ðWrite a novel (what is being invested here?)
ðGet a degree in chemical engineering
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PROJECT LIFE CYCLE
t Initial Investment
ðPurchase of productive facilities
X Land and buildings
X Equipment
ðStartup funds
ðWorking capital
t Project Life
ðStart up - come up to full potential
ðOperate at full potential until end of project life
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PROJECT CASH FLOW
DIAGRAM Perfect
CASH Startup
FLOW
Investment
Period
Payout Time
TIME
Real
Startup
Project Life
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PROJECT ACCOUNTING I
t Gross Profit
(aka Profit Before Taxes or PBT)
PBT = Sales Revenue - Operating Expenses
t Operating Expenses
ðRaw materials
ðUtilities
ðLabor
ðMaintenance
ðOverhead
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PROJECT ACCOUNTING II
Profit
(aka Profit After Taxes or PAT)
PAT = (1 - Trate) (PBT - Depreciation)
where Trate = corporate e tax rate (~ 48%)
t Depreciation
Allowance for the depreciation of the fixed investment
(equipment wears out, etc.
Depreciation = [Fixed Investment]/Nd “Straight
line”
where Nd = depreciation period
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PROJECT ACCOUNTING III
t Cash Flow
What is left after expenses and taxes have been paid.
CF = PBT -Taxes
= (1 - Trate) PBT + Trate Deprec
t Example
Revenue = $1..0 MM /yr; Expenses = $ MM/yr
Investment = $ MM ; Nd = 5; Deprec = $ MM
PBT = $ MM - $ MM = $ MM; Trate = $
CF = (1 - ) + () = $ MM
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PROJECT ACCOUNTING IV
t Accounts Receivable
Money owed to the businsess for goods shipped or
services provided
t Accounts Payable
Money owed by the business to suppiers and employees