Outline of Review Topics

Transcription

1 Outline of Review Topics Cash flow and equivalence Depreciation Special topics Comparison of alternatives Ethics Method of review Brief review of topic Problems 1

2 Cash Flow and Equivalence Cash flow Diagrams Conventions single payments, annuities, gradients Discount factors and equivalence Single payment, uniform series, gradient Factor name, symbol, formula Diagnostic exam problems 1, 10 Sample problem 2 (51) FE-style problems 6, 16 (51) 2

3 Factor Description Converts Factor Future value of a single present amount P to F ( F/P, i %, n ) Present value of a single future amount F to P ( P/F, i %, n ) Uniform series sinking fund F to A ( A/F, i %, n ) Capital recovery P to A ( A/P, i %, n ) Uniform series compound amount Uniform series present worth Uniform gradient present worth Uniform gradient future worth Uniform gradient uniform series A to F ( F/A, i %, n ) A to P ( P/A, i %, n ) G to P ( P/G, i %, n ) G to F ( F/G, i %, n ) G to A ( A/G, i %, n ) 3

4 Cash Flow and Equivalence Non-annual compounding Nominal & effective interest rates.. i = r/m, r = nominal rate and m = compounding periods per year i e = (1 + i) m - 1 Continuous compounding Use formula, or Almost same as daily compounding Diagnostic exam problems 2 Sample problems 3 (51) FE-Style Problems 8, 18 (51) 4

5 Depreciation What is depreciation and why care? Termsinitial cost, salvage value, yearly and cumulative depreciation, book value Ways to depreciate Straight line ACRS DDB (2/N)* Remaining Book Value,.. down to salvage value Sum of Years Digits (Cost Salvage)* (N t + 1)/SOYD Diagnostic exam problems 7, 8 FE-style exam problem 6, 9 (52) 5

6 Special Topics Capitalized cost (like capital recovery, except infinite life) P = A /( interest rate ) Bond problems.. You normally.. Know - Face value and interest (or dividend) payments Find - Bond yield (market rate) or Bond Value (PW) InflationMarket interest ( i ) = effective rate ( í ) and (effect of inflation) i = í + (ƒ+ í*ƒ), and í = (i ƒ)/(1 + ƒ) Diagnostic Exam problem 11 Sample problem 5 (52) FE-Style Problems 10, FE Exam 11 Review, (52) Fall

7 Special Topics Economic life EUAC vs. Age of Retirement of Asset Fixed and variable costs Probabilistic problems Typically solved using PV of expected annual costs EAC are outcomes weighted by their probabilities EAC = p1*outcome 1 + p2*outcome 2, etc. Sum of probabilities = 1.0 Then find PV, EUAV or rate of return Sample problem 6 (53) FE exam style problems, 18 (52) 7

8 Comparison of Alternatives Present worth analysis mutually exclusive, same lives, same function Annual cost analysis same as PW criteria but unequal lives Rate of return that makes PW, FW, EUAC, etc. = 0. Compare with companies minimum attractive rate of return Benefit to cost Premise PW of all benefits compared to PW of all costs. > 1 is good Comparing alternatives Must look at Δ PWB/ Δ PWC Diagnostic exam problem 14 Problems 2, 3, 4 (53) 8

9 Engineering Ethics Professional creeds, codes, ethics go beyond legal Concern for society and profession Concerns - faithful, honest, professional service Safety, health, welfare of public paramount Only provide service where competent Objective and truthful public statements Compete on merit of service, not unfairly Uphold honor and integrity of profession Continue professional development for self and underlings 9

10 Engineering Ethics Ethical priorities 1 Society & public 2 Law 3 Engineering profession 4 Clients protect clients interest - except if dishonest, unethical, unsafe. No double dipping without approval. Fully explain consequences to client. Freely admit errors. Protect confidentiality. Avoid conflict of interest. 5 Employers Only act where qualified. Avoid conflict of interest. Respect other engineers 6 Suppliers no gifts, fair, complete specs, no undue delay of suppliers 7 Other engineers no malicious injury to others except must advise proper authority of unethical or illegal acts, no unfair competition 8 Ones self Don t mortgage your integrity Diagnostic Examination Problems 10