Engineering Economics

Compounding and discounting

The process of calculating future values = compounding, ie the sum of beginning amount and the interest earned. The process of finding out the present value = discounting ie the inverse of compounding. Basically for a single cash flow: F = P [F/P, i%, N] F = P (1+i)N !!! The following are the cases …

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Break Even Analysis (BEA)

Break Even Analysis is a term given to the study of the inter-relationship between cost, volume and profits at various levels of activities. It is the most widely known form of the cost-volume-profit analysis. It is one of the most important techniques of profit planning and control. Advantages of Break Even Analysis: It is a …

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Payback Period

The period of time required to recover the net investment is called payback period, PB. The project which pays back the initial investment in the smallest period is acceptable under this method. Decision: If (calculated PB < standard  PB) => Accept the project If (calculated PB > standard  PB) => Reject the project Merits of …

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Mechanization and its level

echanization is the use of machinery to replace human or animal labor, especially in agriculture and industry. Mechanization is minimizing or reducing labor content so as to maximize performance and economy. It spots the use of control system and instrumentation for automatic or semi-automatic production.