Professional Documents
Culture Documents
Engineering Economy
Engineering Economy
CONTENTS
Ordinary Annuity
Deferred Annuity
Perpetuity
Capitalized Cost
Depreciation
Straight Line Depreciation
Sinking Fund
Declining Balance Method
Sum of Years digit Method
where:
I = Interest earned
i = I / 360 rate of interest per day
P = resent Worth, ( capital)
F = Future Worth
n = Total number of interest
periods in days
r = interest in one year
Note:
For ordinary simple interest, the
interest is computed based on one
bankers year.
1 bankers year = 12 months = 360
days
Each month = 30 days
Example 2.
An interest of 15% for 3 years:
> I = Prt
Where:
r = simple interest rate (per year)
t = time in years or fractions of a year
Example
4 years ; t =4
3 months ; t = 3/12 =
90 days ; t = 90 / 360
2 years and 4 months; t = 2 + 4/12
Where:
i = r / 365 ( ordinary year)
I = r / 366 ( leap year)
Note:
A year is a leap year if it is divisible
by 4 and divisible by 400 by a
centennial year.
Centennial Years are 1800, 1900.
2000. etc.
C. Discount
Relationship Between Rate of Interest and
Rate of Discount
> i= d / ( 1 d )
Successive Discount
Two successive discounts of p% and q% allowed
on an item are equivalent to a single discount of:
> d = ( p + q (pq) / 100) %
Where:
I = rate of interest
D = rate of discount
Example
Two discounts of 15% and 5% are
equivalent to what single discount?
C. P6,937.5
D. P5,937.5
C. 10.30
D. 10.29
C. P1,346.41
D. P1,364.41
C. 10.30
D. 10.29
C. 2.9%
D. 5.9%
C. 5793.50
D. 5937.50
C. 19.45
D. 49.45
C. 4133
D. 4433
D. 635.25
D. 636.25