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Engineering Economy Lectures Solved Examples and Problems Introduction

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Engineering Economy Lectures Solved Examples and Problems Introduction

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Engineering Economy Lectures-solved examples and problems -Introduction

Book · July 2017

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Sada Abd Alkhaliq Alyasri


University of Al-Qadisiyah
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Engineering Economy
Lectures –solved examples and problems

SADA A. ALYASRI
Assistant Professor of project management.
Department of civil engineering
University Of Al-Qadisiyah

IBTISAM. M. ALHAMEEDI
Doctor of project management

|PageI
Copyright © 2017 by Authors

All rights reserved. No part of this publication may be reproduced, stored in a database or

retrieval system, or transmitted in any form or by any means, electronic, mechanical,

photocopying, recording, or otherwise, without the prior written permission of the publisher.

Registration number ( 210 ) Baghdad © 2017

Published by Al-Taief Printing Company.

| P a g e II
To

All of you who may one day ,or already ,have the designation of project

manager assigned to you without the benefit of guidance or training

| P a g e III
PREFACE

Engineers should acknowledge themselves with economic authorization,so


that they could manage their resources, helping them in statring their own
business.
The fundamentals of this book for engineering economy were reviewed and
explained through eight chapters, so that the reader is able to take the
necessary decision on any new investment or project taking into consideration
the value of time and money. The money that flows at different times with
different amounts and the equivalent at different interest rates.The techniques
covered in the book form the basis of how the economic decision for the
engineer by discussing and explaining the various techniques commonly used
in all calculations of economics and engineering to be introduced and applied
with different examples and case studies. Because the combination of these
techniques helps to transfer monetary values forward and backward through
time and at different interest rates. This helps in making the right economic
decision. This book contains 8 chapters as follows :
chapter1: Includes Money- time Relationships with The equations and
formula of payments relationship which is explained in many solved examples.
chapter2: Presents Economic Comparison Methods such as Present cost
method (PC),Net Present worth method (NPW )and
Annual cost method.
Chapter3 : Explains Economic Comparison Methods such as Rate of Return
,Break Even Analysis (B.E.A) and Payback period analysis.
Chapter4 : Discusses Types of depreciation such as Straight line method
(SL), Sum of integers, Declining balance methods and Sinking fund method.
Chapter5: Contains understanding the effect of Inflation whether this effect of
inflation on the present worth or the effect of inflation on the future worth.
Chapter6 : Explains Incentive schemes (strictly proportional schemes and

| P a g e IV
less than proportional bonus schemes).
Chapter7: Clears up how Computer Programs can be used to find the visibility
of the projects.
Chapter8: Contains a case study on the application of economic study tools to
determine the feasibility of projects.
The book is a judicious mix of theory and its application .Our approach is to
explain the basic theory and the formula at the beginning of each chapter ,
followed by a large number of practical problems ,some of which have been
taken from examination conducted by student in college of engineering .Many
chapters –end with problems to test the readers understanding of each topic.
We hope that the readers would find our new volume useful. Suggestion for
its improvement are welcome.

Authors

|PageV
CONTENTS

Prefact V

CHAPTER 1 …………………………………….….……… (1-14)

Interest and Money- time Relationships

1.1 Money- time Relationships

1.2 The equations and formula of payments relationship

1.3 Interest table.

1.4 Uniform gradient series.

1.5 Nominal and Effective Interest Rate

CHAPTER 2 ……………………………………………………(15-38)

ECONOMIC COMPARSION METHODS (PC, NPW, AC)

2.1 Introduction

2.2 ECONOMIC COMPARSION METHODS

2.2.1 Present cost value method (PC)

2.2.2 Net Present worth method (NPW )

2.2.3 Annual cost method (AC)

CHAPTER3 ……… …………………………………………(39-68)

Economic analyzing and comparison (IRR,B.E.P)

3.1 Introduction

3.2 Rate of Return (IRR

3.4 Types of productivity

1.4.3 Deign productivity

| P a g e VI
3.4.2 Planning productivity

3.4.3 Actual productivity

3.5 Break Even Analysis (B.E.P)

3.5.1 Break Even point

3.5.2 Break Even graph

3.5.3 Break - Even Analysis, Multiple Alternatives

3.7Payback period analysis

CHAPTER4 ……………………………………………………….(69-86)

Depreciation

4.1 Introduction

4.2 Types of depreciation

4.2.1 Normal depreciation

4.2.2 Depreciation due to change in price level.

4.2.2.1 Straight line method. (SL).

4.2.2.2 Sum of integers. (SOY) .

4.2.2.3 Declining balance methods.

4.2.2.4 Sinking fund method

Chapter 5 …………………………………………………(87-97)

Inflation

1.3Introductions

5.2 Understanding the effect of Inflation

5.3 The effect of inflation on the present worth

5.4 The effect of inflation on the FW

| P a g e VII
Chapter 6 ………………………………….………………….(98-106)

Incentive schemes

6.1 Introduction

6.2 strictly proportional schemes

1.2.3less than proportional bonus schemes

Chapter 7 …………………………………………….(107-123)

Using Computer Programs to find the fisibility of the projects

7.1 Introduction

7.2 Microsoft Excel

7.3 Financial Calculators

7.3.1 Investment Calculator

CHAPTER 8 ……………………………………………..(124-144)

Case study

8.1 introduction

8.2 The technical study

8.3 The proposed project

8.4. Product demand

8.5 Raw materials

8.6 Equipment and machinery

8.7The costs of the proposed project

8.7.1 Capital and annual fixed costs

8.7.2 Variable costs

8.7.3 Revenue

| P a g e VIII
8.8 Economic feasibility study

8.8.1 Net present value (NPV)

8.8.2 Internal rate of return (IRR)

8.8.3 Break - even point (BEP)

8.9 Conclusion

REFRENCE ……………………………………….(145-146)

APPENDIX …….………………………………….. ii

| P a g e IX

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