ECO 017: ENGINEERING ECONOMICS

FORMULAS

SIMPLE INTEREST
 � = ���
 �=�+�
 � = �(1 + ��)

Note:
Ordinary Simple Interest: 360 days
Exact Simple Interest:
Ordinary Year: 365 days
Leap Year (every 4 years): 366 days

COMPOUND INTEREST
�
 � = �(1 + �)� �ℎ��� � =
�

Note for m:
Annually = 1
Semi-annually = 2
Quarterly = 4
Monthly = 12
Bi-monthly = 6

EFFECTIVE RATE OF INTEREST

�
 ��� = (1 + �)� − 1 where � =
�

CONTINUOUS COMPOUNDING
 � = ����

DISCOUNT
 �=�−�

Discount Rate
�
 �=
�
�
 �=
1+�

Rate of Interest
�
 �=
�
�
 �=
1−�
 ECO 017: ENGINEERING ECONOMICS
FORMULAS

INFLATION
 � = �(1 + �)� (1 + �)�
 � = �(1 + �)�

Inflation Rate
 �� = � + � + ��

ORDINARY ANNUITY
(1+�)�
 �=�
�
(1+�)� −1
 �=�
�(1+�)�

ANNUITY DUE
� �
 �= 1+� −1 1+�
�
� 1+� �
 �= 1+�
� 1+� �

DEFERRED ANNUITY
�
 �= 1+� �−1
�
� 1+� � −1
 �=
� 1+� �+�

PERPETUITY
�
 �=
�

CAPITALIZED COST
�� ��−��
 � = �� + + �
� 1+� −1

ANNUAL COST
 �� = ��
��−�� �
 �� = ��� + �� + 1+� � −1

GRADIENT

Arithmetic
 � = �1 + �2
� (1 + �)� − 1
where �1 is Ordinary Annuity =
� (1 + �)�
�
� 1+� −1 �
�ℎ��� �2 �� �������� = � 1+� � − 1+� �
�
 ECO 017: ENGINEERING ECONOMICS
FORMULAS

 � = �1 + �2
�
�ℎ��� �1 �� �������� ������� = (1 + i)n − 1
�
� 1+� �−1
�ℎ��� �2 �� �������� = � �
−�

OR
� (1+�)� −1 � 1+� � −1 �
 �= � + � 1+� � − 1+� �
� (1+�) �
� � 1+� � −1
 �= (1 + �)� − 1 + −�
� � �
� ��
 �' = � + − 1+� � −1
�

Geometric
� 1−�� 1+�
 �=
1+� 1−�
, where w= 1+�
��
 � = 1+� , if i=r and w=1

DEPRECIATION

STRAIGHT-LINE METHOD
��−��
 �=
�
�
 �� = �� = �� − ��
�
 ��� = �� − ��

SINKING FUND METHOD

�
 � = �� − �� 1+� �−1
1+� � −1
 �� = �
�

SUM OF THE YEARS’ DIGIT METHOD (SoYD)

�
 ����� = � + 1
2
�−�+1 2(�−�+1)
 �� = �� − �� = �� − ��
����� �(�+1)
�
�−�+1 �
 �� = �� − ��
�����
 ECO 017: ENGINEERING ECONOMICS
FORMULAS

DECLINING BALANCE METHOD

� ���
 �=1− ��
� ��
 �=1− ��
 �� = ���−1 − ���

DOUBLE DECLINING BALANCE METHOD

 ��� ≥ ��
2
 �=
�

BREAK EVEN ANALYSIS

 �� = � − �
 �� = �� − �� + �
 � = ��
 � = �� + �
�
 �=
�−�