Ari Tagor Sihombing (Hal 650-672)

7/27/2019 Ari Tagor Sihombing (Hal 650-672)

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TABLE C-17 Discrete Compounding; i= 20%

Single Payment Uniform Series Uniform Gradient

Compound Present Compound Present Sinking capital Gradient Gradient

Amount Worth Amount Worth Fund recovery Present Worth Uniform Series

Factor Factor Factor Factor Factor Factor Factor Factor

To Find F To Find P To Find F To Find P To Find A To Find A To Find P To Find A

Given P Given F Given A Given A Given F Given P Given G Given G

N F/P P/F F/A P/A A/F A/P P/G A/G N

1 1.2000 0.8333 1.0000 0.8333 1.0000 1.2000 0.000 0.0000 1

2 1.4400 0.6944 2.2000 1.5278 0.4545 0.6545 0.694 0.4545 2

3 1.7280 0.5787 3.6400 2.1065 0.2747 0.4747 1.852 0.8791 34 2.0736 0.4823 5.3680 2.5887 0.1863 0.3863 3.299 1.2742 4

5 2.4883 0.4019 7.4416 2.9906 0.1344 0.3344 4.906 1.6405 5

6 2.9860 0.3349 9.9299 3.3255 0.1007 0.3007 6.581 1.9788 6

7 3.5832 0.2791 12.9159 3.6046 0.0774 0.2774 8.255 2.2902 7

8 4.2998 0.2326 16.4991 3.8372 0.0606 0.2606 9.883 2.5756 8

9 5.1598 0.1938 20.7989 4.0310 0.0481 0.2481 11.434 2.8364 9

10 6.1917 0.1615 25.9587 4.1925 0.0385 0.2385 12.887 3.0739 10

11 7.4301 0.1346 32.1504 4.3271 0.0311 0.2311 14.233 3.2893 11

12 8.9161 0.1122 39.5805 4.4392 0.0253 0.2253 15.467 3.4841 12

13 10.6993 0.0935 48.4966 4.5327 0.0206 0.2206 16.588 3.6597 13

14 12.8392 0.0779 59.1959 4.6106 0.0169 0.2169 17.601 3.8175 14

15 15.4070 0.0649 72.0351 4.6755 0.0139 0.2139 18.510 3.9588 15

16 18.4884 0.0541 87.4421 4.7296 0.0114 0.2114 19.321 4.0851 16

17 22.1861 0.0451 105.9306 4.7746 0.0094 0.2094 20.042 4.1976 17

18 26.6233 0.0376 128.1167 4.8122 0.0078 0.2078 20.681 4.2975 18

19 31.9480 0.0313 154.7400 4.8435 0.0065 0.2065 21.244 4.3861 19

20 38.3376 0.0261 186.6880 4.8696 0.0054 0.2054 21.740 4.4643 20

21 46.0051 0.0217 225.0256 4.8913 0.0044 0.2044 22.174 4.5334 21

22 55.2061 0.0181 271.0307 4.9094 0.0037 0.2037 22.555 4.5941 22

23 6.2474 0.0151 326.2369 4.9245 0.0031 0.2031 22.887 4.6475 23

24 79.4968 0.0126 392.4842 4.9371 0.0025 0.2025 23.176 4.6943 24

25 95.3962 0.0105 471.9811 4.9476 0.0021 0.2021 23.428 4.7352 25

30 237.3763 0.0042 1181.8816 4.9789 0.0008 0.2008 24.263 4.8731 30

35 590.6682 0.0017 2948.3411 4.9915 0.0003 0.2003 24.661 4.9406 35

40 1469.7716 0.0007 7343.8578 4.9966 0.0001 0.2001 24.847 4.9728 40

45 3657.2620 0.0003 18281.3099 4.9986 0.0001 0.2001 24.932 4.9877 45

50 9100.4382 0.0001 45497.1908 4.9995 a 0.2000 24.970 4.9945 50

60 56347.5144 a 281732.5718 4.9999 a 0.2000 24.994 4.9989 60

80 2160228.4620 a 10801137.3101 5.0000 a 0.2000 25.000 5.0000 80

5.0000 0.2000


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lnterest and Annuity

Tables for Continuous

compounding

For various values of r from 8% to 20%,

r = nominal interest rate per period, compounded continuourty

N = number of compounding periods

(F/P,r%,N) =

(P/F,1%,N) = =

(F/ A,r%,N) =

(P / A,r%,N) =

APPENDIXD


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TABLE C-18 Discrete Compounding; i= 25%

Single Payment Uniform Series Uniform Gradient

Compound Present Compound Present Sinking capital Gradient Gradient

Amount Worth Amount Worth Fund recovery Present Worth Uniform Series

Factor Factor Factor Factor Factor Factor Factor Factor

To Find F To Find P To Find F To Find P To Find A To Find A To Find P To Find A

Given P Given F Given A Given A Given F Given P Given G Given G

N F/P P/F F/A P/A A/F A/P P/G A/G N

1 1.2500 0.8000 1.0000 0.8000 1.0000 1.2500 0.000 0.0000 1

2 1.5625 0.6400 2.2500 1.4400 0.4444 0.6944 0.640 0.4444 2

3 1.9531 0.5120 3.8125 1.952 0.2623 0.5123 1.664 0.8525 34 2.4414 0.4096 5.7656 2.3616 0.1734 0.4234 2.893 1.2249 4

5 3.0518 0.3277 8.2070 2.6893 0.1218 1.3718 4.204 1.5631 5

6 3.8147 0.2621 11.2588 2.9514 0.0888 0.3388 5.514 1.8683 6

7 4.7684 0.2097 15.0735 3.1611 0.0663 0.3163 6.773 2.1424 7

8 5.9605 0.1678 19.8419 3.3289 0.0504 0.3004 7.947 2.3872 8

9 7.4506 0.1342 25.8023 3.4631 0.0388 0.2888 9.021 2.6048 9

10 9.3132 0.1074 33.2529 3.5705 0.0301 0.2801 9.987 2.7971 10

11 11.6415 0.859 42.5661 3.6564 0.0235 0.2735 10.846 2.9663 11

12 14.5519 0.687 54.2077 3.7251 0.0184 0.2684 11.602 3.1145 12

13 18.1899 0.0550 68.7596 3.7801 0.0145 0.2645 12.262 3.2437 13

14 22.7374 0.0440 86.9495 3.8241 0.0115 0.2615 12.833 3.3559 14

15 28.4217 0.0352 109.6868 3.8593 0.0091 0.2591 13.326 3.4530 15

16 35.5271 0.0281 138.1085 3.8874 0.0072 0.2572 13.748 3.5366 16

17 44.4089 0.0225 173.6357 3.9099 0.0058 0.2558 14.109 3.6084 17

18 55.5112 0.018 218.0446 3.9279 0.0046 0.2546 14.415 3.6698 18

19 69.3889 0.0144 273.5558 3.9424 0.0037 0.2537 14.674 3.7222 19

20 86.7362 0.0115 342.9447 3.9539 0.0029 0.2529 14.893 3.7667 2021 108.4202 0.0092 429.6809 3.9631 0.0023 0.2523 15.078 3.8045 21

22 135.5253 0.0074 538.1011 3.9764 0.0019 0.2519 15.233 3.8365 22

23 16.4066 0.0059 673.6264 3.9764 0.0015 0.2515 15.363 3.8634 23

24 211.7582 0.0047 843.0329 3.9811 0.0012 0.2512 15.471 3.8861 24

25 264.6978 0.0038 1054.7912 3.9849 0.0009 0.2509 15.562 3.9052 25

30 807.7936 0.0012 3227.1743 3.9950 0.0003 0.2503 15.832 3.9628 30

35 2465.1903 0.0004 9856.7613 3.9984 0.0001 0.2501 15.937 3.9858 35


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40 7523.1638 0.0001 30088.6554 3.9995 a 0.2500 15.977 3.9947 40

45 22958.874 a 91831.4962 3.9998 a 0.2500 15.992 3.9980 45

50 70064.9232 a 280255.6929 3.9999 a 0.2500 15.997 3.9993 50

60 652530.4468 a 2610117.7872 4.0000 a 0.2500 16.0000 3.9999 60

4.0000 0.2500


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INTEREST AND ANNUITY TABLES FOR CONTINOUS COMPOUNDING 651

TABLE D-1 Continous Compounding; r = 8%

Discrete Flows

Single Payment Uniform Series

Compound Present Compound Present

Amount Worth Amount Worth

Factor Factor Factor Factor

To Find F To Find P To Find F To Find P

Given P Given F Given A Given A

N F/P P/F F/A P/A N

1 1.0833 0.9231 1.0000 0.9231 1

2 1.1735 0.8521 2.0833 1.7753 2

3 1.2712 0.7866 3.2568 2.5619 3

4 1.3771 0.7261 4.5280 3.2880 4

5 1.4918 0.6703 5.9052 3.9584 5

6 1.6161 0.6188 7.3970 4.5771 6

7 1.7507 0.5712 9.0131 5.1483 7

8 1.8965 0.5273 10.7637 5.6756 8

9 2.0544 0.4868 12.6602 6.1624 9

10 2.2255 0.4493 14.7147 6.6117 10

11 2.4109 0.4148 16.9402 7.0265 11

12 2.6117 0.3829 19.3511 7.4094 12

13 2.8292 0.3535 21.9628 7.7629 13

14 3.0649 0.3263 24.7920 8.0891 14

15 3.3201 0.3012 27.8569 8.3903 15

16 3.5966 0.2780 31.1770 8.6684 16

17 3.8962 0.2567 34.7736 8.9250 17

18 4.2207 0.2369 38.6698 9.162 18

19 4.5722 0.2187 42.8905 9.3807 19

20 4.9530 0.2019 47.4627 9.5826 20

21 5.3656 0.1864 52.4158 9.7689 21

22 5.8124 0.172 57.7813 9.9410 22

23 6.2965 0.1588 63.5938 10.0998 23

24 6.812 0.1466 69.8903 10.2464 24

25 7.3891 0.1353 76.7113 10.3817 25

26 8.0045 0.1249 84.1003 10.5067 26

27 8.6711 0.1153 92.1048 10.6220 27

28 9.3933 0.1065 100.776 10.7285 28

29 10.1757 0.0983 110.1690 10.8267 29

30 11.0232 0.907 120.345 10.9174 30

35 16.4446 0.0608 185.439 11.2765 35

40 24.5325 0.0408 282.547 11.5172 40

45 36.5982 0.0273 427.416 11.6786 45

50 54.5982 0.0183 643.535 11.7868 5055 81.4509 0.0123 965.947 11.8593 55


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60 121.510 0.0082 1446.93 11.9078 60

65 181.272 0.0055 2164.47 11.9404 65

70 270.426 0.0037 3234.91 11.9623 70

75 403.429 0.0025 4831.83 11.9769 75

80 601.845 0.0017 7214.15 11.9867 80

85 897.847 0.0011 10768.1 11.9933 85

90 1339.43 0.0007 16070.1 11.9977 90

95 1998.20 0.0005 23979.7 12.0007 95 10

0 2980.96 0.0003 35779.3 12.0026

10

0

652 APPENDIX D/ INTEREST AND ANNUITY TABLES FOR CONTINOUS COMPOUNDING


Discrete Flows








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N F/P P/F F/A P/A N

1 1.1052 0.9048 1.0000 0.9048 1

2 1.2214 0.8187 2.1052 1.7236 2

3 1.3499 0.7408 3.3266 2.4644 3

4 1.4918 0.6703 4.6764 3.1347 4

5 1.6487 0.6065 6.1683 3.7412 5

6 1.8221 0.5488 7.8170 4.2900 6

7 2.0138 0.4966 9.6391 4.7866 7

8 2.2255 0.4493 11.6528 5.236 8

9 2.4596 0.4066 13.8784 5.6425 9

10 2.7183 0.3679 16.3380 6.0104 10

11 3.0042 0.3329 19.0536 6.3433 11

12 3.3201 0.3012 22.0604 6.6445 12

13 3.6693 0.2725 25.3806 6.9170 13

14 4.0552 0.2466 29.0499 7.1636 14

15 4.4817 0.2231 33.1051 7.3867 15

16 4.953 0.2019 37.5867 7.5886 16

17 5.4739 0.1827 42.5398 7.7713 17

18 6.0496 0.1653 48.0137 7.9366 18

19 6.6859 0.1496 54.0634 8.0862 19

20 7.3891 0.1353 60.7493 8.2215 20

21 8.1662 0.1225 68.1383 8.3440 21

22 9.025 0.1108 76.3045 8.4548 22

23 9.9742 0.1003 85.3295 8.5550 23

24 11.0232 0.0907 95.3037 8.6458 2425 12.1825 0.0821 106.327 8.7278 25

26 13.4637 0.0743 118.509 8.8021 26

27 14.8797 0.0672 131.973 8.8693 27

28 16.4446 0.0608 146.853 8.9301 28

29 18.1741 0.0550 163.298 8.9852 29

30 20.0855 0.0498 181.472 9.0349 30

35 33.1155 0.0302 305.364 9.2212 35

40 54.5981 0.0183 509.629 9.3342 40

45 90.0171 0.0111 846.404 9.4027 45

50 148.413 0.0067 1401.65 9.4443 5055 244.692 0.0041 2317.10 9.4695 55

60 403.429 0.0025 3826.43 9.4848 60

65 665.142 0.0015 6314.88 9.4940 65

70 1096.63 0.0009 1401.65 9.4997 70

75 1808.04 0.0006 17182.0 9.5031 75

80 2980.96 0.0003 28334.4 9.5051 80

85 4914.77 0.0002 46721.7 9.5064 85

90 8103.08 0.0001 77037.7 9.5072 90

95 13359.7 a 127019.0 9.5076 95

100 22026.5 a 209425.0 9.5079 100


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INTEREST AND ANNUITY TABLES FOR CONTINOUS COMPOUNDING 653


Discrete Flows







N F/P P/F F/A P/A N

1 1.2214 0.8187 1.0000 0.8187 1

2 1.4918 0.6703 2.2140 1.4891 2

3 1.8221 0.5488 3.7132 2.0379 3

4 2.2255 0.4493 5.5353 2.4872 4

5 2.7183 0.3679 7.7609 2.8551 5

6 3.3201 0.3012 10.4792 3.1563 6

7 4.0552 0.2466 13.7993 3.4029 7

8 4.9530 0.2019 17.8545 3.6048 8

9 6.0496 0.1653 22.8075 3.7701 9

10 7.3891 0.1353 28.8572 3.9054 1011 9.0250 0.1108 36.2462 4.0162 11


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12 11.0232 0.0907 45.2712 4.1069 12

13 13.4637 0.0743 56.2944 4.1812 13

14 16.4446 0.0608 69.7581 4.2420 14

15 20.0855 0.0498 86.2028 4.2918 15

16 24.5325 0.0408 106.288 4.3325 16

17 29.9641 0.0334 130.8210 4.3659 17

18 36.5982 0.0273 160.785 4.3932 18

19 44.7012 0.0224 197.383 4.4156 19

20 54.5981 0.0183 242.0840 4.4339 20

21 66.6863 0.0150 296.6820 4.4489 21

22 81.4509 0.0123 363.3690 4.4612 22

23 99.4843 0.0101 444.820 4.4713 23

24 121.510 0.0082 544.3040 4.4795 24

25 148.413 0.0067 665.814 4.4862 25

26 181.272 0.0055 814.227 4.4917 26

27 221.406 0.0045 995.500 4.4963 27

28 270.426 0.0037 1216.910 4.5000 28

29 330.299 0.0030 1487.33 4.5030 29

30 403.429 0.0025 1817.63 4.5055 30

35 1096.63 0.0009 4948.60 4.5125 35

40 2980.96 0.0003 13459.4 4.5151 40

45 8103.08 0.0001 36594.3 4.5161 45

50 22026.5 a 99481.4 4.5165 50

55 59874.1 a 270426.0 4.5166 55

60 162755.0 a 735103.0 4.5166 60


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Standard NormalDistribution

The standard normal distribution is a normal (Gaussian) distribution with a mean of 0

and a variance of 1. It is a continuous diskibution with a range of - to +. The

tabled values denote the probability of observing a value from minus infinity to the Z

value indicated by the left column and top row.lhezvalue is determined by applying the

following formula to the observed data:

Z:(X- )/.

APPENDIXE


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Interested readers are referred to any introductory statistics text book for an In-depth

discussion of the use of the standard normal distribution function.

654

STANDART NORMAL DISTRIBUTION 655

z 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

-3.4 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0002

-3.3 0.0005 0.0005 0.0005 0.0004 0.0004 0.0004 0.0004 0.0004 0.0004 0.0003

-3.2 0.0007 0.0007 0.0006 0.0006 0.0006 0.0006 0.0006 0.0005 0.0005 0.0005

-3.1 0.0010 0.0009 0.0009 0.0009 0.0008 0.0008 0.0008 0.0007 0.0007 0.0007

-3.0 0.0013 0.0013 0.0013 0.0012 0.0012 0.0011 0.0011 0.0011 0.0010 0.0010

-2.9 0.0019 0.0018 0.0017 0.0017 0.0016 0.0016 0.0015 0.0015 0.0014 0.0014

-2.8 0.0026 0.0025 0.0024 0.0023 0.0023 0.0022 0.0021 0.0021 0.0020 0.0019

-2.7 0.0035 0.0034 0.0033 0.0032 0.0031 0.0030 0.0029 0.0028 0.0027 0.0026

-2.6 0.0047 0.0045 0.0044 0.0043 0.0041 0.0040 0.0039 0.0038 0.0037 0.0036

-2.5 0.0062 0.0060 0.0059 0.0057 0.0055 0.0054 0.0052 0.0051 0.0049 0.0048

-2.4 0.0082 0.0080 0.0078 0.0075 0.0073 0.0071 0.0069 0.0068 0.0066 0.0064

-2.3 0.0107 0.0104 0.0103 0.0099 0.0096 0.0094 0.0091 0.0089 0.0087 0.0084

-2.2 0.0139 0.0136 0.0132 0.0129 0.0125 0.0122 0.0119 0.0116 0.0113 0.0110

-2.1 0.0179 0.0174 0.0170 0.0166 0.0162 0.0158 0.0154 0.0150 0.0146 0.0143

-2.0 0.0228 0.0222 0.0217 0.0212 0.0207 0.0202 0.0197 0.0192 0.0118 0.0183

-1.9 0.0287 0.0281 0.0274 0.0268 0.0262 0.0256 0.0250 0.0244 0.0239 0.0233

-1.8 0.0359 0.0352 0.0344 0.0336 0.0329 0.0322 0.0314 0.0307 0.0301 0.0294

-1.7 0.0446 0.0436 0.0427 0.0418 0.0409 0.0401 0.0392 0.0384 0.0375 0.0367

-1.6 0.0548 0.0537 0.0526 0.0516 0.0505 0.0495 0.0485 0.0475 0.0465 0.0455

TABLE E-1 Areas under the normal curve


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-1.5 0.0668 0.0655 0.0643 0.0630 0.0618 0.0606 0.0594 0.0582 0.0571 0.0559

-1.4 0.0808 0.0793 0.0778 0.0764 0.0749 0.0735 0.0722 0.0708 0.0694 0.0681

-1.3 0.0968 0.0951 0.0934 0.0918 0.0901 0.0885 0.0869 0.0853 0.0838 0.0823

-1.2 0.1151 0.1131 0.1112 0.1093 0.1075 0.1056 0.1038 0.1020 0.1003 0.0985

-1.1 0.1357 0.1335 0.1314 0.1292 0.1271 0.1251 0.1230 0.1210 0.1190 0.1170

-1.0 0.1587 0.1562 0.1539 0.1515 0.1492 0.1469 0.1446 0.1423 0.1401 0.1379

-0.9 0.8141 0.1841 0.1788 0.1762 0.1736 0.1711 0.1685 0.1660 0.1635 0.1611

-0.8 0.2119 0.2090 0.2061 0.2033 0.2005 0.1977 0.1949 0.1922 0.1894 0.1867

-0.7 0.2420 0.2389 0.2358 0.2327 0.2296 0.2266 0.2236 0.2206 0.2177 0.2148

-0.6 0.2743 0.2709 0.2676 0.2643 0.2611 0.2578 0.2546 0.2514 0.2483 0.2451

-0.5 0.3085 0.3050 0.3015 0.2981 0.2946 0.2912 0.2877 0.2843 0.2810 0.2776

-0.4 0.3446 0.3409 0.3372 0.3336 0.3300 0.3264 0.3228 0.3192 0.3156 0.3121

-0.3 0.3821 0.3783 0.3745 0.3707 0.3669 0.3632 0.3594 0.3557 0.3520 0.3483

-0.2 0.4207 0.4168 0.4129 0.4090 0.4052 0.4013 0.3974 0.3936 0.3897 0.3859

-0.1 0.4602 0.4562 0.4522 0.4483 0.4443 0.4404 0.4364 0.4325 0.4286 0.4247

0.0 0.5000 0.4960 0.4920 0.4880 0.4840 0.4801 0.4761 0.4721 0.4681 0.4641


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656 APPENDIX E / STANDART NORMAL DISTRIBUTION

z 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359

0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5753

0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141

0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.648 0.6517

0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879

0.5 0.6915 0.695 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.719 0.7224

0.6 0.7257 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7517 0.7549

0.7 0.7580 0.7611 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852

0.8 0.7881 0.7910 0.7939 0.7967 0.7995 0.8023 0.8051 0.8078 0.8106 0.8133

0.9 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389

1.0 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621

1.1 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.879 0.8810 0.883

1.2 0.8849 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015

1.3 0.9032 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177

1.4 0.9192 0.9207 0.9222 0.9236 0.9251 0.9265 0.9278 0.9292 0.9306 0.9319

1.5 0.9332 0.9345 0.9357 0.9370 0.9382 0.9394 0.9406 0.9418 0.9429 0.9441

1.6 0.9452 0.9463 0.9474 0.9484 0.9495 0.9505 0.9515 0.9525 0.9535 0.9545

1.7 0.9554 0.9564 0.9573 0.9582 0.9591 0.9599 0.9608 0.9616 0.9625 0.9633

1.8 0.9641 0.9649 0.9656 0.9664 0.9671 0.9678 0.9686 0.9693 0.9699 0.9706

1.9 0.9713 0.9719 0.9726 0.9732 0.9738 0.9744 0.975 0.9756 0.9761 0.9767

2.0 0.9772 0.9778 0.9783 0.9788 0.9793 0.9798 0.9803 0.9808 0.9812 0.9817

2.1 0.9821 0.9826 0.9830 0.9834 0.9838 0.9842 0.9846 0.985 0.9854 0.9857

2.2 0.9861 0.9864 0.9868 0.9871 0.9875 0.9878 0.9881 0.9884 0.9887 0.989

2.3 0.9893 0.9896 0.9898 0.9901 0.9904 0.9906 0.9909 0.9911 0.9913 0.9916

2.4 0.9918 0.9920 0.9922 0.9925 0.9927 0.9929 0.9931 0.9932 0.9934 0.9936

2.5 0.9938 0.9940 0.9941 0.9943 0.9945 0.9946 0.9948 0.9949 0.9951 0.9952

2.6 0.9953 0.9955 0.9956 0.9957 0.9959 0.9960 0.9961 0.9962 0.9963 0.9964

2.7 0.9965 0.9966 0.9967 0.9968 0.9969 0.9970 0.9971 0.9972 0.9973 0.9974

TABLE E-1 (continued)


18/47

2.8 0.9974 0.9975 0.9976 0.9977 0.9977 0.9978 0.9979 0.9979 0.9980 0.9981

2.9 0.9981 0.9982 0.9982 0.9983 0.9984 0.9984 0.9985 0.9985 0.9986 0.9986

3.0 0.9987 0.9987 0.9987 0.9988 0.9988 0.9989 0.9989 0.9989 0.9990 0.999

3.1 0.9990 0.9991 0.9991 0.9991 0.9992 0.9992 0.9992 0.9992 0.9993 0.9993

3.2 0.9993 0.9994 0.9994 0.9994 0.9994 0.9994 0.9994 0.9995 0.9995 0.9995

3.3 0.9995 0.9995 0.9996 0.9996 0.9996 0.9996 0.9996 0.9996 0.9996 0.9997

3.4 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9998


19/47

APPENDIXF

Selected References

Au, T., and T.P. Au. Engineering Economic for capital Investment Analysis,2nd ed.

(Boston: Allyn and Bacon, 1992).

BARISH, N.N., and S. KAPLAN. Economic analysis for Engineering and Managerial

Decision Making (New York McGraw-Hill,1978).

BIERMAN, H., JR., and S. SMIDT. The capital Budgeting Decision,8th ed. (New york:

Macmillan, L993).

BLANK, L.T., and AJ. TARQUIN. Engineering Economy,6th ed. (New york: McGraw-

Hill,2005).

BOWMAN, M.S. Applied Economic Analysis for Technologists,Engineersa, and

Managers, 2nd ed. (Upper Saddle River, NJ: Prentice Hall, 2003).

BRIMSON, J.A.Activity Accounting: An Activity-Based Approach( New york John Wiley

& Sons,1991).

BUSSEY,L .E., and T.G. ESCHENBACH. The Economic Analysis of lndustrial Projects,

2nd ed. (Upper Saddle River, N]: Prentice Hall,1992).

CAMPEN, J.T.Benefit, cost, and Beyond (cambridge, MA: Ballinger publishing

Company, 1986).

CANADA, J.R., and W.G. SULLIVAN. Economic and Multiattribute Analysis of Advanced

Manufacturing systems(Upper Saddle River, NJ: prentice Hall, 1989).

CANADA, J.R., and W.G. SULLIVAN, D.J. KULONDA and J.A. WHITE. Capital

Investment Decision Analysis for Engineering and Management, 3rd ed. (upper

saddle River, NJ: Prentice Hall, 2005).

CLARK, J.J.,T.J. HINDELANG, and R.E. PRITCHARD. Capital Budgeting: planning and

Control of Capital Expenditures (upper saddle River, NJ: prentice Hall,1979).

COLIER, C.A., and C.R. GRAGADA. Engineering Cost Analysis, 3rd ed. (New york:

Harper & Row, 1998).

Engineering Economist,The. A quarterly journal jointly published by the Engineering

Economy Division of the American Society for Engineering Education and the

Institute of Industrial Engineers. Published by IIE, Norcross, GA.

Engineering News-Record. Published monthly by McGraw-Hill, New York.


20/47

ESCHENBACH, T.G. Engineering Economy: Applaying Theory to Practice (Chicago:

Richard D. Irwin, 1995)

FABRYCKY,W.J., G.J. THUESEN, and D. VERMA. Economic decision Analysis,3rd ed.

(Upper Saddle River, NJ: Prentice Hall, 1998).

FLEISCHER, G.A. lntroduction to Engineering Economy(Boston: PWS Publishing

Company,1994).

GOICOECHEA, G.A., D.R. HANSEN, and L. DDUCKSTEIN. Multiobjective decision

Analysis with Engineering and Busines Applications ( New York: John Wiley &

Sons,1982).

GRANT, E.L., W.G. IRESON, and R.S. Leavenworth. Principeles of Engineering

Economy, 8th ed. (New York: John Wiley & Sons, 1990).


21/47

658 APPENDIX F / SELECTED REFERENCES

HULL, J.C. The Evaluation of Risk in Business Investment(New York: Pergamon Press

1980).

Industrial Engineering A monthly magazine published by the Institute of Industrial

Engineers, Norcross, GA.

lnternal Revenue Service Publication 534. Depreciation. U.S. Government Printing

Office, revised periodically.

JELEN, F.C., and J.H. BLACK. Cost and Optimization Engineering, 3rd ed. (New York:

McGraw-Hill,1991).

JONES, B.W. lnflation in Engineering Economic Analysis (New York: John wiley &

Sons,1982).

KAHL, A.L., and W.F. Rentz. Spreadsheet Applications in Engineering Economics (St.

Paul, MN West Publishing Company, 1992).

KAPLAN, R.S., and R. Cooper. The Design of Cost Management Systems (Upper Saddle

River, NJ: Prentice Hall, 1999).

KEENEY, R.L., and H. RRAIFFA. Decisions with Multiple Objectives Preferences and

Value Trade-offs (New York: John Wiley & Sons, 1976).

LASSER ,J.K. Your lncome Tax[New York Simon & Schuster (see latest edition)].

MALLIK, A.K.Engineering Economy with Computer Applications (Mahomet, IL:

Engineering Technology, 1979 ).

MATTEWS L.M. Estimating Manufacturing Casts: A Practical Guide for Managers and

Estimators ( New York McGraw-Hill, 1983).

MERRETT, A.J., and A. SYKES. The Finance and Analysis of Capital Projects (New York:

John Wiley & Sons, 1963).

MISHAN, E.J. Cost-Benefit analysis (New York Praeger Publishers,1976).

MORRIS, W.T. Engineering Economic analiysis (Reston, V A: Reston Publishing, 1976).

NEWNAN, D.G., T.G. ESCHENBACH, and J.P. LAVELLE, Engineering Economic Analysis,

9th ed. (San ]ose, CA: Engineering Press, 2004).

OSTWARD, P.F. Engineering Cost Estimating, 3rd ed. (Upper Saddle River, NJ:

Prentice Hall,l992).

PARK, C.S. Contemporary Engineering Economics (Upper Saddle River, NJ: Prentice

Hall,2002).

PARK, C.S., and G.P. SHARP-BETTE. Advanced Engineering Economics (New York: ]

ohn Wiley & Sons, 1990)


22/47

Selected references 659

PARK, W.R., and D.E. JACKSON. Cost Engineering Analysis: A Guide to Economic

Evaluation of Engineering Projects,2nd ed. (New York John Wiley & Sons,1984).

PORTER, M.E. Competitive Strategy: Techniques for Analyzing lndustries and

Competitors (New York: The Free Press, 1980).

RIGGS, J.L., D.D. BEDWORTH, and S.V. RANDHAWA. Engineering Economics, 4th ed

(New York McGraw-Hill, 1996).

SMITH, G.W. Engineering Economy: The Analysis of Capital Expenditures, 4th ed.

(Ames,IO: Iowa State University Press, 1987).

STEINER, H.M. Engineering Economic Principles, 2nd ed. (New York: McGraw-Hill,

1996)

STERMOLE, F.J., and J.M. STERMOLE. Economic Evaluation and lnvestment Decision

Methods,6th ed. (Golden, CO: investment Evaluations Corp., 1997).

STEWART, R.D. Cost Estimating (New York John Wiley & Sons, 1982).

STEWART, R.D., R.M. Wyskida, and J.D. JOHANNES, eds. Cost Estimators' Reference

Manual, 2nd ed. (New York John Wiley & Sons, 1995).

TAYLOR, G.A. Managerial and Engineering Economy, 3rd ed. (New York Van Nostrand

Reinhold, 1980).

THUESEN, G.J., and W.J. FABRYCKY. Engineering Economy, 9th ed. (Upper Saddle

River, NJ: Prentice Hall 2001).VANHORNE, J.C. Financial Management and Policy,8th ed. (Upper Saddle River, NJ:

Prentice Hall, 1989).

WEINGARTNER, H.M. Mathematical Programming and the analysis of Capital

Budgeting Problems (Englewood Cliffs, NJ: Prentice-Hall, 1975).

WHITE, J.A., K.E. Case, D.B. PRATT, and M.H. AGEE. Principles of Engineering

Economic Analysis, 4th ed. (New York: John Wiley & Sons, 1998).

WOODS, D.R. Financial Decision Making in the Process Industry (Englewood Cliffs,

NJ): Prentice-Hall, 1975).


23/47

APPENDIXG

Answers to Selected

Problems

CHAPTER 2

2-12 a. D* = 2,425 circuit

boards/month

b. Profit = $75,612.50/month

(maximum profit)

c. D = 480.6 481 circuit

boards/month

D = 4,369.4 4,369

circuit boards/month

d. 481 to 4,369 circuit boards

per month

2-14 D* 240 units per month

Profit = $4,960 per monthD = 18 units/month

D= 462 units/month

2-18 a. D* 50 units per month

b.

for D > 1. Therefore, D* = 50

is a point of maximum profit.

2-19 X = l5.64 megawatts

2-21 D' = 3,112pumps/month;

D' = 2,404pumps/month;

22.75% reduction

2-27 R-30; LCC = $19,513.00

2-30 $4,448

2-37 a. Either machine

b. Machine A

2-39 Process 1 ; Profit : $2,640/ day

2-39 a. Speed B; cost/piece : $0.104

2-43 Method 1; Profit - $10,974,A0A

2-53 Select (a)

2-54 Select (b)

2-55 Select (c)

2-59 Select (d)

CHAPTER 3

3-4 = $262,78A.27

3-6 a. = 154.9

= 203.4

b. = $412,710

3-7 a. = 176


24/47

b. = 144.5

= $797,696

3-l I a. $630A/year

3-15 $11,54

3-22 a. y = 31.813 + 0.279 x

b. R = 0.99

c. y = $101.56

3-26 x = 4,497 units

3-29 Total Cost = $2,239,046

3-30 s = 0.9 (90% learning curve)

3-38 Select (d)

3-39 Select (c)

3-40 Select (b)

3-42 Select (d)


25/47

ANSWERS TO SELECTED PROBLEMS 661

CHAPTER 4

I = $4,250

I = $7,560

F = $13,382

P = $31,775

i = 2.17% per yearA = $2,925

P = $8,865

A = $3,397.50

Fr= $124,966

a. N8years.

b. I = 15.11%

c.P = $720.96

d. A= $277.40

Select D; F = $13,490

A = -$581.86

P = $33,511.70

Z = $3,848.15

i' /year = 11.55% per year

W = $714.25

P= -$165,104

A = $1,203.69

Z = $608.21

P = $100(P / A,10%,4 + $100(P/G ,

10%,8)

A = $124.34

Q= $435.75

N = 8 years

A = $2,790.73

X = $5,573.25

a. 10.25%

b. 10.38%

c. 10.51%

Select D; A = $1,430

P = $4,729.87

N = 30 months

i/yr = 8.24%

F = $6,340.50

Select (c); A = $312

F = $17,303.19

a. False; b. False; c. False;

d. True; e. False; f. True;

g. False; h. False; i, False;

4-99 Z = $1,421.67

4-103 A = $1,320.66

4-106 a. True b. True c. False

d. False e. False

4-114 Select( e)

4-116 Select(d )

4-717 Select (c)

4-1 19 Select(d )

4-121 Select (c)

4-122 Select (a)

4-123 Select (c)

CHAPTER 5


26/47

5-2 N = 72 months

5-4 PW (12%) = $13,423.57

5-5 PW (15%) = $2,911.60

Fw (15%) = $5,855.60

AW (15%) = $868.70

5-8 PW (15%) = $352,650> 0;

Invest in the new product line.

5-12 a. = $7,688.96

b. A = $150,992.90

5- 14 i'% = 7.5% per six months

5-17 PW of 5 yr lining = $5,514.72

PW 10 yr lining = $9,003.56

5-21 A = $4,490/year

5-25 AW (of costs) = $20,736.30 per

year

5-27 a. As i , the PW approaches -

$3,000

b. = 6 years

c. PW(0%) = -$1,000

AW(0%) = -$166.70

5-30 APR = 22.8% compounded monthly

5-33 = 51.1% Per year.

5-34 i = 14 %

5-38 a. I5.2% b. 18.8% c. 21.5%

d. 20%

5-41 i = 1.24% per year

5-43 a. ' = 6 years

b. i'%= 29.4% per year

5-49 a. i = 1/2% and 28.8% per year.b. i' = 21.15%;ERR > 20% accept

project.

5-51 a. PW = 1.710 X + 26.006Y

b. AW = 0.2732X + 4.1558Y


27/47


28/47


29/47

ANSWER TO SELECTED PROBLEMS

CHAPTER 4

1 I= $4,250

2 I= $7,560

3 F = $13,382

9 P = $31,775

11 i = 2.17% per year

14 A = $2,925

17 P = $8,865

20 A = $3,397.50

24 F4 = $124,966

25 a. N - 8 years.

b. i =15.11%

c. P = $720.96

d. A = $277.40

29 Select D; F4 = $13,490

33 A = - $681.86

35 P = $33,511.70

38 Z $3,848.15

42 i'/year =11.55% per year

45 W = $714.25

48 Po = $165,104 1 A = $1,203.69

53 Z = $608.21

58 Po = $100(P/A, 10%, 4) + $100(P/G,

10%, 8)

60 A = $124.34

64 Q = $435.75

65 N = 8 years ;

69 A = $2,790.73

73 X = $5,573.25

77 a. 10.25%

4-99 Z = $1,421.67

4-103 A = $1,320.66

4-106 a. True b. Truec.

False

d. False e. False

4-114 Select (e)

4-116 Select (d)

4-117 Select (c)

4-119 Select (d)

4-121 Select (c)

4-122 Select (a)

4-123 Select (c)

CHAPTER 5

5-2 N = 72 months

5-4 PW(12%) = -$13,423.57

5-5 PW(15%) = $2,911.60

FW(15%) = $5,855.60

AW(15%) $868.70

5-8 PW(15%) $352,650 > 0;

invest in the new product line.

5-12 a. VN = $7,688.96

b. A = $150,892.90

5-14 i'% = 7.5% per six months

5-17 PW of 5 yr lining = $5,614.72

PW 10 yr lining = $9,003.56

5-21 A = 54,490/year

5-25 AW (of costs) = $20,736.30 per

149


30/47


5-52 a. IIW = 59.91 Y

b. A = 9.908Y

5-63 Select (d)

5-64 Select (a)

5-67 Select (c)

5-69 Select (e)

5-70 Select (c)

5-72 Select (d)

CHAPTER 6

6-2 Select Design D3 for PW, FW, and AW

6-4 Select Design C; AW,(20%) = $16,245

6-7 Select Alternative B; PWB(20%) $9,180

6-12 Select Alternative Al; AW(18%)

$13,492

6-14 Select Design A; AWA(6%) = -

$48,594/mile, PWA (6%) = -

$557,273/mile

6-17 Select Alternative Y; PWy(5%) =

$40,885.54

6-21 a. Standard light bulb is less expensive

by $0.44 per year

6-25 a. Select A; AWA = -$12,053.60

b. Select A; AWA = -$12,053.60

6-27 a. Select Alternative El; AWE,(15%)

= -$16,990

b. Select Alternative El; AWE'(15%)

= -$16,990

6-30 Select Bridge Design L; CWL(15%)

7-7 a. $180,550.50

b. $14,449.50c. $43,329

7-11 a. d3 = $3,428.57; BV5 =

$42,857.15

b. d3 = $6,297.38; BV5 = $27,759.86

c. d- = $10,494; BV5, = $13,386

d. d2 = d3=. =d14_$4,285.71

BV5 = $40,714.30

7-16 a. Income taxes = $18,850

b. Depreciation + Expenses $130,000

7-19 t =37.96%;

t = 41.92%

7-22 Alternative A: Plastic; AWA = -

$1,184

7-25 PW(15%) = $363,690 > > 0;

investment should be made

7-27 Design S1; AW(10%) = -$290

7-31 N = 6 years

7-33 X = $864,135 / year

7-34 a. PW $171,592

b. AW $37,115

7-37 AW(12%) = $3,468 for both ATCF

and EVA

7-39 Accept Quotation II, PW = -

$136,848

7-46 Select (b)

7-48 Select (c)

7-51 Select (d)

7-53 Select (d)

150


31/47


= -$378,733 6-32 Recommend Design

ER1

6-38 Select Alternative 2

6-40 Select Design 4; PW4 = $23,433.23

6-48 i' 21.6%; Select (c)

6-49 X = 6.26 or 7 planes per year; Select

(a)

6-52 i' = 13.4% > 10%; Select (c)

6-54 Select (e)

6-55 Select (a)

6-57 Select (b); PWA(15%) = $42,848

CHAPTER7

7-6 a. $7,142.86

b. $11,200

c. $5,000

7-56 Select (d)

7-59 Select (a)

7-61 Select (e)

CHAPTER 8

8-2 N 18 years

8-4 Alternative B, PW = -$369,080

8-5 Alternative I, PW = $10,000

8-11 PO(A$) = $43,755

8-14 a. FW(A$) = $144,105

b. FW(R$) = $44,932

8-20 a. if, = 36.08% per year

b. if, = 18.44% per year

8-25 PW(18%) = -$12,233

8-30 Select Purchase alternative;

FW -$1,952,551

8-38 Select (d)

840 Select (c)

42 Select (c)

CHAPTER 9

9-1 Keep the old lift truck; PW = $23,331

9-5 Economic life = 3 years

9-9 Keep the defender, AW = $15,383

9-11 Reinforce the existing bridge

9-16 Keep the defender, PW

56,542.40, Anti

11-14 b. Retain the steel pier, AW =

$29,332

11-17 Construct the levee

11-19 a. Select Design 3

b. Select Design 3

11-21 Select Design B

11-22 B-C Ratio = 1.1; Select (d)

11-23 Select (b)

11-25 Select (b)

151


32/47


$1,725.89

9.19 Select Alternative B, PW S1,440,4239-23 Lease the challenger

9-25 Relocate the existing transformers

(Alterna tive B); CW = $54,239

9-32 Select (a)

9-33 Select (c)

9-35 Select (d)

CHAPTER 10

10-3 =0.818

10-5 a. MV(Alternative 2) 2,050

b. N = 7.3 years

10-9 X = $933,953 in annual revenues year

10-13 a. At themost likely estimates, Design is

marginally- preferred to B,

b. X = 11,872 units/year

10-18 X = 362,500,000 Btu per year

10-21 Select

the ABC brand motor, AW,

= -$1,831

10-30 Select (b)

10-31 Select (a)

10-34 Select (b)install Machine A

10-38 True

10-39 False

CHAPTER 11

CHAPTER 12

12-2 The four-lane bridge should be builtnow, PW = $3-500,000

12-4 E(X) 1,350 cubic yards

V(X) 66,500(cubic yards)

SD(X) = 258 cubic yards

12-6 Select Design E, PW = $239,414

12-7 Alternative T, Annual Cost =

$52,435

12-10 E(PWAT) = 533,403; implement

the project

12-13 a. V(PW) = 1,097.7 x 106($)2

SD(PW) = 533,131

b.Pr/PW > 0) = 0.57

c. E(AW)Rs = $1,866

The project appears questionable.

The E(PW) is positive but the

SD(PW) is approximately two times

the expected value. Also the Pr[PW

> 01 = 0.57 is only somewhat

attractive.

12-16 Pr(X 171) = 0.7881

12-19 E[PW(B A)] = $5,228

(PWA B) = $1,183.97

12-25 Select new product, PW = $62,125

12-27 Choose to build

CHAPTER 13

13-2 a. Leasing a tuck is better.

b. The annual cost of having to

operate without a truck, $2,000,

is less than the minimum cost

152


33/47


11-1 Select B

11-2 Alternative C

11-5 Alternative B

11-8 Expand the present facility (Alt. A)

11-13Recommend building the dam (II)

alternative in (a). Hence, it is

better to operate without a truck.

13-5 Leasing is better for case a, but

buying is better for case b.

13-6 Leasing is better if the life is 3

years. It appears that a breakeven

life is 4 years (to the nearest whole

year).

13-8 Objective function value = $219.89

13-11 Objective function value= $8,822

13-12 Recommendations differ for Projects

A and C 13-13 R, = 10%

CHAPTER 14

14-5 a. Alternative 2

b.Alternative 2

c. Alternative 2

14-7 Dominanceno alternatives

eliminated SatisficinAlternative A

eliminated

Lexicographyno alternatives

eliminated

Hurwicz procedureAlternative Aeliminated

Additive weightingAlternative B

selected

14-9 Alternative A

14-11 The solution involves subjective

factors which will vary from one

student to another.

14-13 Dominanceno selection

Feasible rangesno selection

LexicographyDomestic 2

Additive weighting Domestic 2

14-14 Xij 0.7 (keep tool)

1.0 (purchase new)

153


34/47


A

Abandonment 383, 399

Accounting

cost 72

depreciation 72, 302

fundamental equation of 71

as source of estimates 89

Accounting fundamentals 71

Accuracy of cost estimates 88

Actual dollars, definition 354

Additive weighting method 595

Adjusted (cost) basis 304

After-tax cash flow analyses

general procedure for 327

impact of inflation on 362

sensitivity analysis in 448

spreadsheet example 332

After-tax cash flow table 329

After-tax comparisons

equations for ATCF 328

illustration using different methods 331-

341 After-tax economic life 400

Allocation of capital 548, 567

Alternative Depreciation System (ADS)

development of

brainstorming, 12, 115

Nominal Group Technique 12,115

do-nothing (no change) 6, 263, 566

202 essential 202

feasible 10

independent 480, 568

investment 248

mutually exclusive 247, 482, 568

repeatability assumption 252, 274, 396,

486

rules for comparing by rate of return

methods

260

Analysis (study) period 202, 252

infinite 252, 397

as a source of uncertainty 426

Annual percentage rate (APR) 169

Annual worth (AW) method 213, 254,

339 spreadsheet example 220, 257, 618

unequal lives 279, 283

Annuity 142 d

deferred 149

fixed and responsive (to inflation) 360

INDEX

154


35/47


310, 311 Alternatives

comparison of 247, 270, 339, 387, 482

basic philosophy 248, 251

by benefit/cost ratio method 482

by capitalized worth method 211, 259

by equivalent worth methods 253 3

by rate of return methods 260, 283

with different useful lives 274

contingent 572

cost 249, 339

coterminated assumption 252, 274, 396

decision (selection) 14

ordinary 149

Answers to problems 660

Arithmetic sequences

interest formulas for 158-159

modeling expenses 281


Assets 71, 327 Assumed certainty 424

Attributes 582

selection of 584

weighting of 595

Augmentation versus replacement 383,

410 Avoidable difference 136

B

Balance sheet 71, 74

Base alternative 248, 262 Base time

period 354 Basis (cost) 304, 316

Before-tax cash flow 328 Before-tax MARK

322

Benefit-cost ratio method 486, 473 :)

after-the-fact justifications 487

case study 489

conventional ratio 474-476 criticisms of

487

distributional considerations 488

independent projects /alternatives 480

modified ratio 474-476 mutually

return to 129, 201

sources 550

Capital allocation 548-550, 567

Capital asset pricing model (CAPM) 553-

555 Capital financing 548-550 Capital

gains and losses 327

Capital investment, fundamental purpose

of 248 Capital rationing 203, 480 Capital

recovery

depreciation plus interest 214 factor

147

Capital sources 550

borrowed (debt) capital 129, 551

equity capital 129, 552

155


36/47


exclusive alternatives 482

omitting qualitative (no monetary)

information 489


Beta (volatility) 554

Bibliography 657

Bond rate 209

Bond valuation 209

Book cost (value) 29, 304 Borrowed

capital 129, 551 Borrowing-lending

terminology 139 Brainstorming 12, 115

Breakeven analysis 38, 43, 339, 427, 615

Breakeven chart 38, 43, 341, 431, 433,

616 Breakeven life 230, 428 Breakeven

point 38, 43, 341, 427

Budget constraints 568, 572

Budget (semi-detailed) estimates 88

Burden 28, 74

C

Capacity utilization 428, 452

Capital 128

allocation 548-550, 567

average weighted cost of 322, 552, 555

borrowed 129, 322, 551

budgets 568, 572, 564

debt 129, 322, 551

equity 129, 322, 552

financing 548-550

investment 33, 248

leasing 564-567

Capitalized cost 211

Capitalized worth (CW) method 211, 259,

397 Case (comprehensive) studies

after taxes 338

automobile financing 575

benefit-cost ratio 489

cost estimating 116

decision tree analysis 535

depreciation 317

economic equivalence 179

incremental analysis 285

inflation 371, 410

no monetary attributes 60, 587

present economy 60

process yield 231

replacement 410

sensitivity 450

Cash flow(s)

after-tax 328

approach 13

developing 79, 81, 116

diagrams 133-135

estimating 79, 81, 91

tables 133, 136

Certainty (assumed) 424

Challenger (new asset) 383

economic life 386, 390, 400

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Charts

breakeven 38, 43, 341, 431, 433, 616

sensitivity 435, 438, 440, 442

Class life 305, 310, 311, 314

Combinations, mutually exclusive 568

Combined (market) interest rate 354

Common errors

in inflation analyses 357

in rate of return analyses 265

in replacement analyses 412, 414

Common unit of measurement 7

Communication 562

Comparison of alternatives 247, 339, 387,

482 Compensatory models 586, 591

Competition 36

Compound interest 131, 168

Compounding

continuous, with discrete cash flows

172, discrete 149

more often than cash flows 170

more often than yearly 170

Conditional probability 532

Constant dollars 354

Constant percentage method 307

Consumer Price Index 93, 353

Consumer goods (services) 34

Contingency 426

Contingent projects 572 Continuous

compounding

nonrecurring 28

operation and maintenance 33

opportunity 30, 129, 385

overhead 28, 74

prime 76

recurring 28

standard 29

sunk 29, 385

target 110

terminology 24

variable 24

Cost accounting 72

Cost alternatives 249, 339

Cost and revenue structure 82, 87

Cost-capacity factor 97

Cost basis 304, 316

Cost-driven design optimization 45

Cost driver 45, 96

Cost estimating (see Estimating)

Cost estimating relationships (CERs) 96

development of 102

Cost indexes (see Indexes)

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discrete cash flows, interest formulas

for 172-174

Continuous random variables 501

evaluation of projects with 512

Conventional B-C ratio 474-476

Correlation coefficient 107

Cost(s) 24

basis 304, 316

book 29, 304

capital recovery 213-214

cash 29

concepts 24

depreciation 302 direct 28, 74

disposal 34

driver 45, 96

fixed 24

general elements of 74 incremental 25,

57 index (see Indexes) indirect 28, 74

investment 32

life cycle 31, 87, 585 marginal 387,

390, 393, 401

noncash 29, 302

Cost of capital 550-551, 555

debt 552

equity 555

weighted average 322, 552, 555

Cost recovery percentages 312

Cost terminology 24

Coterminated assumption 252, 274,

396,397 Criteria 7, 14

Current dollars 354

Cycle time 55

D

Data sources for cost estimating 89

Debt capital 129, 551

Decision analysis, multiple objectives in

583 Decision reversal (sensitivity to) 444

Decision trees

case study 535

definition 526

deterministic example 526

general principles of diagramming 528

with random outcomes 529

Declining balance method 307

Defender (old asset) 383

economic life of 387, 393, 400

investment value 385, 402

Deferred annuities 150

Deferred investments 394, 413

Definitive (detailed) estimates 88

Disjunctive resolution 587

Disposal cost 34

Disposal price (of bonds) 209 Dollars

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Deflation (general price) 353, 354, 355

Delphi method 90

Dependence between pairs of projects 561

Depreciable life. 305

Depreciable property 302, 387

Depreciation 72, 302

accounting for 72, 302

Alternative Depreciation System (ADS)

310, 311

basis 304, 316

class lives (MACRS) 305, 310, 311, 314

classical methods 303, 305

comprehensive example 317

constant percentage method 307

declining percentage method 307

General Depreciation System (GDS)

311 half-year convention 312

historical methods 303, 305

illustration in after-tax analysis 330

MACRS method 310

MACRS rates 313

Matheson formula 307

present worth of 320, 330

property class 313, 315

recapture 327, 332

recovery period 304, 311

recovery rate 305, 313

straight-line method 305

switchover option 308

units-of-production method 308

useful life guidelines 311

actual 354

constant 354

current 354

real 354

Dominance 586

Do-nothing alternative 6, 263, 566

E

Economic breakeven analysis 38, 43, 339,

427,615

Economic decision studies, importance of

4 Economic equivalence (case study) 179

Economic life 384, 386-387

after-tax 400

of challenger 386, 390

of defender 387, 393


Economic value 583

Economic value added (EVA) 341

Economy

engineering (definition) 4

present (studies) 50

Effective income tax rate 322, 325

corporate rates 324

Effective interest rate 168, 172

Elective projects 202

End-of-period cash flows 134, 202, 611

Engineering (definition of) 4

Engineering design

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Design (see Engineering design)

Design to cost 110

Design to price 108

Developing cash flows 79

Developing cost estimating relationships

(CERs) 102

Dimensionality 585

Direct costs 28, 74

Disbenefits 467, 477

Discounted cash flow rate of return

method 217 Discounted payback period

230

Discrete compounding 149

Discrete random variables 500

evaluation of projects with 503

cost-driven optimization 45

definition 9

for the environment 45, 285

process 9

target costing 110

value engineering 114

Engineering economic analysis procedure

8 Engineering economy

definition 4

and the design process 8 7

interest rate to use 357

origins of 5

principles of 5-8

Equity capital 71, 129, 552

Equivalence 132,152

case study 179

terminology 139

Equivalent uniform annual cost (EUAC)

214,384 Equivalent worth methods 205-

216, 253

ERR method (see External rate of

return) Essential projects 202, 250

Esteem value 583

Estimates

accounting data (as a source) 89

accuracy versus costs 89

needed for typical g engineering

economy study 87

Exponential model (for estimating) 97

External of return (ERR) method 227, 245-

246, 269

advantages over IRR method 228

F

Face value of bonds 209

Factor technique (for

estimating) 94 Feasible

alternatives 10

Financing

with debt capital 551

with equity capital 552

installment 222

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types of 88

ways to accomplish 90

Estimating,

by analogy 90

baseline 84

bottom-up approach 80, 108, 116

case study 116

cash flows 79, 116

comparison technique

90

components of an integrated approach

82

data (sources)

89, 93 Delphi

method 90 factor

technique 94

indexes 91

learning and improvement 98

parametric 96

power-sizing technique 97

product costs

108 purpose 88

ratio technique

91 relationships

96, 103 sellingprice 110

spreadsheet example 100, 105, 109, 113

target costing 110

techniques (models)

88, 91

top-down approach 80, 110

unit technique 93

through leasing 564-567

Fixed costs 24

Future worth (FW) method 212,

254 spreadsheet example 220,

257, 618

G

Gains and losses on capital 327

General Depreciation System (GDS) 311

General economic environment 34

General price inflation rate 353, 354

calculation of 353

Geometric sequences 143,163

modeling price changes 372

spreadsheet example 166, 617

Gradients

arithmetic (uniform) sequences 157, 28i,

617 geometric sequences 163, 372, 617


Graphical sensitivity displays 431, 433,

435, 438, 440,442

Graphical breakeven point solutions 38, 43,

341, 431,433

Green engineering 45, 285

Gross income 323

H

Hurdle rate 203, 231

Hurwicz procedure 593

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EUAC method (see Equivalent uniform

annual cost)

Exchange rates

366 Excise taxes

322

Expected value 501

Expected value of perfect information

(EVPI) 531, 536

Expenses (see Costs)

Experience curve (see Learning curve)

I

Improvement (see Learning)Imputed market value 284

In-lieu payments 468 Income statement

71, 74 Income taxes 301, 321

cash flow for 328

corporate federal tax rates 324

effect of, on average cost of capital

322, 555 effective rate 325

gains and losses 327 inflation's effect

on 362 replacement studies 387, 400,

410

Inconsistent ranking problem 260

Incremental analysis of alternatives 50

benefit-cost method 483 case study

285

rate of return methods 262

spreadsheet example 268, 485

unequal lives 277, 283

Incremental cash flow 249, 260, 263

fundamental role 261 Incremental cost 25,

57 Incremental revenue 25

Independent investment opportunities

/projects

480,568

compound 131,168

definition 129

factor relationships 149

origins of 130 real rate 354

simple 130

Interest factors

for continuous compounding 174

for discrete compounding 150

relationships 148

Interest rate

constant 206

effective 168

inflation-free 354

nominal 168

public projects 472

real versus combined, definition 354

risk adjusted 445

risk-free 554 time varying 167

Interest symbols 150,174

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Indexes 91

Indirect costs 28, 74

Inflation (and price changes) 353

analogy to foreign exchange rates 366

case studies 371, 410 common errors

357

fixed and responsive annuities 360

general price (inflation) 353, 354

impact of general price inflation onafter-tax studies 362

interest rate to use in engineering

economy studies 357

modeling with geometric cash flow

sequences 372

relationship between actual dollars and

real dollars 355

relationship between combined and real

interest rates 358

in replacement studies 410

spreadsheet example 364, 413, 414

terminology and basic concepts 354

Installment financing 222

Intangible property 303

Interest

combined (nominal) rate 354

Interest tables

continuous compounding 650

discrete compounding 631

Internal rate of return 217, 260, 332, 450,

570 assumption 227

common errors 265

difficulties 227 modified 227

multiple rates of return problem 227,

244 selecting trial rates 219

spreadsheet example 220, 221, 268,

618

Internal Revenue Service (IRS) 304

Interpolation 219, 223

Investment alternatives 248

Investment classification 560

Investment balance diagram 217, 223

Investment cost 32

IRR method (see Internal rate of return)

J

Joint probability 533-534

L

Labor costs 75

Learning

and improvement 98 Minimum attractive rate of return (MARK)

202-204, 557-559

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curve 98

Leasing of assets 339, 383, 410, 564-567

true lease v. conditional sale 565

Lexicography 587 Liabilities 71

tax 326

Life

of challenger 386, 390

of defender 387, 393

depreciable 305

economic 384, 386, 387,400

guideline periods 311

ownership 384 physical 384

useful 251, 274, 305, 384

Life cycle 31, 87

phases of 31-32

relationship to design 32

Life cycle cost 31, 412, 585

Linear interpolation 219, 223

Linear programming and capital allocation

571-575

Liquidity 229, 233

Lives, different, repeatability v.

coterminated assumptions 252, 274,

396-397

Loan repayment schemes 132

Luxuries 35

M

Make versus purchase (studies) 57

after-tax 322

definition 202

guidelines for 202-203

opportunity cost principle 203, 558 risk

adjusted 445, 557

Modified ACRS 303,310

flow diagram 315

Modified B-C ratio 474-476

Modified internal rate of return (MIRK) 227

Monopoly 36

Monte Carlo simulation 518

spreadsheet example 522-524 Mortgages

(see Installment financing) Multiple

alternatives

independent 480, 569

mutually exclusive 247, 482, 569

Multiple attributes, methods for considering

582, 586,591

Multiple internal rates of return 227,244

Multiple objectives 7, 13, 582

Multiple-purpose projects 468

Mutually exclusive alternatives 247, 482,

569 analysis of (see Comparison of

alternatives) ranking errors 260, 482

Mutually exclusive combinations 569

N

Necessities 35

Net cash flow 13, 134, 248

Net operating profit after taxes 341, 552

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Manufacturing example of cost estimating

109

Manufacturing progress function (see

Learning curve)

Marginal cost 387, 390, 393, 401

Marginal probability 533-534

Market premium 555

Market value 304,385-386

Material selection 52

Mathematical expectation 501

Matheson formula 307

Maximin and maximax rules 593-594

Measures of economic worth 34

Method of feasible ranges 586

Method of least squares 104

Net salvage value 305 Net worth 71

Nominal Group Technique 12,115

Nominal interest rate 168

No compensatory models 586

No dimensional scaling 591

No monetary factors (attributes) 7, 13,

415, 489,

582

case study 60, 587

choice of 584

selecting a measurement scale 585

Nonrecurring costs 28

Normal probability distribution 513, 515

Notation 626

O

Objectives

multiple 7,13, 582

setting minimum return 202-204

OBRA 321 Obsolescence 383 )

Operation and maintenance costs 33

Opportunity cost 30, 129

in determination of interest rates 202-

204, 472, 558

in replacement analysis 385 Optimistic-

pessimistic estimates 441

Order of magnitude estimates 88

Price index (see Indexes)

Prime costs 76

Principles of engineering economy 5-8

Probabilistic risk analysis 499

an application perspective 512

Probabilities

conditional 532

joint 533-534

marginal 533-534

revised 532

Probability functions 500

Probability tree diagram 510

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Ordinal ranking 589

Ordinary annuity 149

Outsider viewpoint 385-386, 387, 402

Overhead costs 28, 74-75

Overhead rate 75

Ownership life 385

P

Parametric cost estimating 96

Par value (of bonds) 209

Payback (payout) period method

discounted 230

simple 229

Perfect competition 36

Perpetual series of uniform payments 211

Personal property 303

Perspective (viewpoint)

in engineering economy studies 6, 84,

137

life cycle 45

outsider 385

public projects 467

systems 10

Physical life 384

Planning horizon 202, 252

Portfolios 553, 571

Post evaluation (of results) 8, 14, 72, 563

Postmortem project review 563

Postponement (of investment) 395

Power-sizing technique (for estimating) 97

Problem solving, efficiency 10

Producer goods (services) 34

Producer Price Index 93, 353

Profit 38-42, 53, 55, 71, 80, 110, 129,

341, 540, 549 Profit and loss statement

71

Profitability 202, 217, 229, 233, 262, 321,

327, 343, 570

index 217

Project (investment) portfolio 553, 571

Project selection 559-563

Projects

dependence between pairs of 561

elective 202 essential 202

independent (comparisons among)

480,

569-571

multiple-purpose 468

public 465

public versus privately owned 466

Property

depreciable 302, 387

intangible 303 personal 303

real 303

tangible 303

Property class 304, 310-311

Property taxes 321 Public projects 465

additional benefits v. reduced costs

477,479

benefit-cost ratio 473

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Present economy studies 50

case study 60

Present worth (PW) method 205, 254, 331

spreadsheet example 220, 257, 332,

436, 618

Price 34

benefits 467 costs 467

difficulties inherent in 470

disbenefits 467, 477

interest rate 472

167

Ari Tagor Sihombing (Hal 650-672)

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Transcript of Ari Tagor Sihombing (Hal 650-672)