Terms, Definitions, & Symbols
In borrowing and lending, the starting amount is called_________________.
What is Principal?
Determine the interest rate and the interest amount, if a borrower borrows $10,000 on May 1st and has to repay $10,700 one year later.
What is $700 and what is 7%/year?
When looking at a project return on investment, _______ and ________ are two types of analysis used as a first measure of profitability and are more higher level and generally to calculate or determine.
What are Payback and Return on investment?
These individuals do estimating, planning, design development, and project development with cost in mind.
Who are Engineers?
These types of costs are related to the level of operational activity (e.g. the cost of fuel for construction equipment will be a function of the number of days of use).
What are variable costs?
When looking at engineering economic formulas, "P" or "PW" is known as ____________ __________.
What is Present Worth?
_________________________ = (principal)(number of periods)(interest rate)
What is simple interest (I=Pni)?
This type of analysis is calculated by the following formula:
(Gain from Investment-Cost of Investment)/Cost of Investment
What is Return on Investment or ROI?
_________________________ are constructed or manufactured to meet human or society’s needs/desires.
What are Engineering facilities/products?
This cost covers the entire life-cycle of a product, and includes feasibility, design, construction, operation and disposal costs.
What is Life-Cycle Cost?
When looking at engineering formulas in the realm of engineering economics, "i" is used to designate ____________.
What is Interest?
"r" in the formula below:
r = interest accrued per unit time/principal x 100%
is used to determine the ______________.
What is the Interest Rate or Rate of Return (ROR)?
This type of analysis compares present value of future cash inflows with the initial investment on a relative basis and is calculated by the following formula:
PV of Cash Flows/Initial Investment
What is Profitability Index or PI?
When assessing or evaluating projects in a manufacturing environment, these types of projects tend to get priority or be ranked as a higher need even when they may have no return on investment.
What are Health, Safety & Environmental projects?
This type of cost can't be recovered or altered by future actions and is not a part of engineering economic analysis.
What is a Sunk Cost?
______________________________explains the change in the amount of money over time for funds owed by or owned by a corporation or individual.
What is Time Value of Money or TVM?
The following notations or formulas are used for what F/P or P/F Factor:
P=F(P/F,i,n) or P=F(1+i)^-n
What is Single-payment present worth?
This type of financial project analysis is generally easier to understand than Net Present Value (NPV) for non-financial executives.
What is Internal rate of Return or IRR?
A project or investment in a new real asset is known as a _____________________.
What is a capital investment or a capital project?
These costs usually occur over the useful life of an activity. Examples include salaries, benefits, and equipment repairs.
What are Operation & Maintenance Costs?
____________________are the Profits left after taxes and dividends are paid. These are monies that may be reinvested into the organization.
What are Retained Earnings?
This MS Excel formula:
"=RATE(n, A,P,F)"
calculates the __________________________ .
What is the compound interest rate i?
When analyzing projects, Accounting for risk is one of four guidelines used to determine if a project is a ___________ or ____________.
What is Go or No Go?
This time period is the amount of time that a company or investor wants or plans to look ahead in order to recover their project investment.
What is a Planning Horizon?
This type of cost gets activity started such as property improvement, transportation, installation, and initial expenditures. It can also be a piece of equipment on a capital project.
What is a First or Initial Cost?