Chapter 3 COST-ESTIMATION TECHNIQUES

Indexes
Costs and prices vary with time for a number of reasons, including

(1) technological advances‫التقدم التكنولوجي‬

(2) availability of labor and materials, ‫توفر المواد والعمالة‬

(3) inflation. ‫التضخم‬

An index

is a dimensionless number that indicates how a cost or a price has changed with
time with respect to a base year. Indexes provide a convenient means for
developing present and future cost and price estimates from historical data.

Example 3-3 : A certain index for the cost of purchasing and installing
utility boilers is keyed to 1988, where its baseline value was arbitrarily set at 100.
Company XYZ installed a 50,000-lb/hour boiler for $525,000 in 2000 when the
index had a value of 468. This same company must install another boiler of the
same size in 2014. The index in 2014 is 542. What is the approximate cost of the
new boiler ?

n=2014 ‫الزمن المستقبلي‬ 2000 ‫الزمن الماضي‬

In=542 , Cn= ? Ck=525000 $ , Ik=468

Cn=525000 (542/468) = 608013 $

Example:

Ck

Six years ago, an diesel electric set cost $160,000. The cost index for this class of
equipment six years ago was 187 and is now 194, what is the approximate cost of it
now? Ik In Cn=??

Ck=160000$

Ik=187

In=194

Cn= ?

Cn= 160000 (194/187)= 165989.30 $

Power-Sizing Technique:

When the specifications of a particular product is change ‫عندما تتغير المواصفات لمنتج‬
‫معين‬

SA: ‫المواصفات الجديدة للمنتج‬ CB : ‫الكلفة أو السعر األصلي للمنتج‬

SB : ‫المواصفات القديمة للمنتج‬ CA : ‫تكلفة أو سعر المنتج بعد تعديل مواصفاته‬

X = cost-capacity factor to reflect economies of scale. ‫ثابت يعطى في المسألة‬

Example 3-6:

Suppose that an aircraft manufacturer desires to make a preliminary estimate of the

cost of building a 600-MW fossil-fuel plant for the assembly of its new
longdistance aircraft. It is known that a 200-MW plant cost $100 million 20 years
ago when the approximate cost index was 400, and that cost index is now 1,200.
The cost-capacity factor for a fossil-fuel power plant is 0.79.

Question 3-13:

Six years ago, an 80-kW diesel electric set cost $160,000. The cost index for this
class of equipment six years ago was 187 and is now 194. The cost-capacity factor
is 0.6.

a. The plant engineering staff is considering a 120-kW unit of the same general
design to power a small isolated plant. Assume we want to add a precompressor,.
Determine the total cost of the 120-kW unit.

b. Estimate the cost of a 40-kW unit of the same general design.

‫‪CHAPTER 4‬‬ ‫‪The Time Value of Money‬‬

‫الزيادة الحاصلة على المال خالل الزمن (القيمة الزمنية للمال)‬

‫‪The time value of money is the most important concept in engineering economy.‬‬

‫كما تشكل القيمة الزمنية للمال مع الريع )‪ ( Interest‬المبدأ االخر المهم وهو التكافؤ‪ .‬لو حصلنا على‬

‫قرض من بنك ما يترتب على ذلك القرض مبلغ اضافي فوق المبلغ االصلي ‪ .‬المبلغ االضافي المترتب على‬
‫المدين هو مقابل الفترة الزمنية التي تمر على القرض حيث يزداد مع الزمن‪ .‬تسمى الزيادة الحاصلة على‬
‫المبلغ االصلي والمترتبة عن مرور الزمن بالقيمة الزمنية للمال ‪ ,‬ويتم التعبير عن القيمة الزمنية للمال باسم‬
‫)‪ ( Interest‬الريع‬

‫‪Basic concept:‬‬

‫القيمة الزمنية للمال ‪- The time value of money‬‬

‫التغير في المال من حيث الربح او الخسارة ‪- Cash flow (CF):‬‬

‫نسبة الفائدة ‪- Interest rate:‬‬

‫القيمة االولية )‪- Purchase cost: capital ( first cost‬‬

‫رأس المال ‪- Principle :‬‬

‫‪- Salvage value: is the estimated value of an asset at the end of its useful life. It‬‬
‫‪represents the amount that a company could sell the asset for after it has been fully‬‬
‫هي القيمة المقدرة لألصل في نهاية عمره اإلنتاجي‪ .‬وهو يمثل المبلغ الذي يمكن للشركة أن ‪depreciated.‬‬
‫‪.‬تبيع األصل به بعد أن يتم استهالكه بالكامل‬

‫‪-interest‬‬

‫‪Difference between an ending amount of money and a beginning amount of money‬‬

‫‪Interest = amount owed now – principal‬‬

‫‪- Interest rate: Interest paid over a time period expressed as a percentage of‬‬
‫‪principal‬‬