Download - Kuliah 1 - Blankchapter_1-Edit
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
1/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
1Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
CHAPTER I
FOUNDATIONS OFENGINEERING ECONOMY
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
2/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
2Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1. Foundations: Overview
1. Questions
2. Decision Making
3. Study Approach
4. Interest Rate
5. Equivalence
6. Simple and Compound Interest
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
3/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
3Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Why Engineering Economy isImportant to Engineers (and
other professionals)
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
4/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
4Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Definition
ENGINEERING ECONOMY IS INVOLVED WITH
THE FORMULATION, ESTIMATION, ANDEVALUATION OF ECONOMIC OUTCOMES
WHEN ALTERNATIVES TO ACCOMPLISH ADEFINED PURPOSE ARE AVAILABLE.
ENGINEERING ECONOMY IS INVOLVED WITH THE
APPLICATION OF DEFINED MATHEMATICALRELATIONSHIPS THAT AID IN THE COMPARISON
OF ECONOMIC ALTERNATIVES
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
5/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
5
Definition
Ekonomi Teknik adalah ilmu yang
mempelajari penerapan aspek-aspek ekonomidalam engineering, yang mengevaluasi
perbandingan antara biaya dan manfaat (aruskas) yang ditimbulkan dari suatu alternatif.
Ekonomi Teknik adalah teknik analisa untuk
mengevaluasi kelayakan dari sistem, produk, ataujasa, dalam kaitannya dengan nilai uang.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
6/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
6Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Ekonomi Teknik digunakan untukpengambilan keputusan manakala terdapat
beberapa alternatif rencana yang telah
memenuhi persyaratan teknisdan masing-masing membutuhkan suatu nilai investasi,sehingga perlu dipilih manakah yang lebih
ekonomis.
Jadi Ekonomi Teknik akan dibutuhkan padasaat aspek ekonomi menjadi kriteria
pemilihan yang utama.
Kapan ?
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
7/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
7Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Mengapa ?
Engineers harus memahami dunia ekonomi karena :
adanya keterbatasan dana (capital)
Capital tidak tak terbatas
Capital bukan milik perusahaan
Capital milik pemilik perusahaan
Capital is not freeit has a cost
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
8/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
8Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Pengetahuan tentang Ekonomi Tekniksangat anda butuhkan untuk dapat
membuat perbandingan ekonomi dari
berbagai alternatif permasalahan baikdalam pekerjaan (pemerintah maupun
swasta) maupun kehidupan sehari-hari.
Mengapa ?
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
9/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
9Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
CHAPTER I Section 1.2
Peran Ekonomi Teknik dalamDecision Making
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
10/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
10Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Role of Engineering Economy
Ekonomi Teknik hanyalah alat untukpenentuan dalam suatu pengambilan
keputusan (decision making).
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
11/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
11Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Problem-Solving Approach
1. Understand the Problem
2. Collect all relevant data/information
3. Define the feasible alternatives
4. Evaluate each alternative
5. Select the best alternative
6. Implement and monitor
C i h Th M G Hill C i I P i i i d f d i di l
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
12/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
12Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Section 1.2 Problem-Solving Approach
1. Understand the Problem
2. Collect all relevant data/information
3. Define the feasible alternatives
4. Evaluate each alternative
5. Select the best alternative
6. Implement and monitor
Major Role ofEngineeringEconomy
C i ht Th M G Hill C i I P i i i d f d ti di l
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
13/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
13Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Section 1.2 Problem-Solving Approach
1. Understand the Problem
2. Collect all relevant data/information
3. Define the feasible alternatives
4. Evaluate each alternative5. Select the best alternative
6. Implement and monitor
One of the moredifficult tasks
C i ht Th M G Hill C i I P i i i d f d ti di l
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
14/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
14Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Section 1.2 Problem-Solving Approach
1. Understand the Problem
2. Collect all relevant data/information
3. Define the feasible alternatives
4. Evaluate each alternative
5. Select the best alternative
6. Implement and monitor Where the majortools of Engr.
Economy areapplied
Copyright The McGraw Hill Companies Inc Permission required for reproduction or display
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
15/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
15Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Section 1.2 Problem-Solving Approach
1. Understand the Problem
2. Collect all relevant data/information
3. Define the feasible alternatives
4. Evaluate each alternative
5. Select the best alternative
6. Implement and monitor ToolsPresent Worth, Future Worth
Annual Worth, Rate of ReturnBenefit/Cost, Payback,
Capitalized Cost, Value Added
Copyright The McGraw Hill Companies Inc Permission required for reproduction or display
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
16/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
16Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Time Value of Money
Money can make money if Invested
Bila kita mengivestasikan uang, kita berharapuang kita akan menjadi lebih besar di masa
depan Berkaitan erat dengan interest rate
The change in the amount of money over agiven time period is called the time value ofmoney; by far, the most important conceptin engineering economy
Copyright The McGraw Hill Companies Inc Permission required for reproduction or display
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
17/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
17Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Performing and EngineeringEconomy Study
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
Copyright The McGraw-Hill Companies Inc Permission required for reproduction or display
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
18/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
18Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Performing a Study
1. Identifikasi alternatifalternatifpenyelesaian dari permasalahan yangada.
2. Kumpulkan data & informasi
3. Estimasi cash flow dari setiap alternatif
4. Analisa masing-masing cash flow daritiap alternatif
Copyright The McGraw-Hill Companies Inc Permission required for reproduction or display
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
19/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
19Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Pemilihan Alternatif
Untuk menganalisa, diperlukan:
Konsep time value of $$
Interest Rate
Ukuran2nilai ekonomi
5. Lakukan evaluasi dgn pembobotan danmemperhitungkan faktor parameter2
nonekonomi
6. Pilih, Jalankan, dan monitor
Copyright The McGraw-Hill Companies Inc Permission required for reproduction or display
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
20/69
Copyright The McGraw Hill Companies, Inc. Permission required for reproduction or display.
20Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Parameter-Parameter yang Dibutuhkan
Nilai investasi awal
Perkiraan durasi proyek
Estimasi cash flows (pendapatan,pengeluaran, dan salvage values)
Interest rate (Tingkat Suku Bunga)
Inflasi dan Pajak
Semua parameter-parameter diataskemudian disusun dalam sebuah Cash Flow
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
21/69
Copyright The McGraw Hill Companies, Inc. Permission required for reproduction or display.
21Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Cash Flows
Positive cash flows adalah perkiraanaliran uang yang masuk ke perusahaan(revenue, salvage values, dll)
Negative cash flows adalah perkiraanaliran uang yang keluar dari perusahaanBiaya Investasi, Operasional &Maintenance, dan Pajak)
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
22/69
Copyright The McGraw Hill Companies, Inc. Permission required for reproduction or display.
22Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Taxes
A realistic economic analysis must assessthe impact of taxes.
Called andAFTER-TAXcash flow analysis Not considering taxes is called a BEFORE-
TAXCash Flow analysis.
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
23/69
py g p , q p p y
23Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Taxes
A Before-Tax cash flow analysis (while notas accurate) is often performed as apreliminary analysis.
A final, more complete analysis should beperformed using an After-Tax analysis
Both are valuable analysis approaches
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
24/69
py g p , q p p y
24Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.9 MinimumAttractive Rate of Return
An investment is a commitment of funds andresources in a project with the expectation ofearning a return over and above the worth of
the resources that were committed. Economic Efficiency means that the returns
should exceed the inputs.
In the for-profit enterprise, economic
efficiencies greater than 100% are required!
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
25/69
py g p q p p y
25Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.9 The MARR
A firms financial managers set a minimuminterest rate that that all accepted projectsmust meet or exceed.
The rate, once established by the firm istermed the Minimum Attractive Rate of Return(MARR).
The MARR is expressed as a percent per year.
Numerous models exist to aid a firms financialmanagers in estimating what this rate shouldbe in a given time period.
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
26/69
26Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Cash Flows: Their Estimationand Diagramming
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
27/69
27Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Important TERMS
CASH INFLOWS
Money flowing INTO the firm from outside
Revenues, Savings, Salvage Values, etc.
CASH OUTFLOWS
Disbursements
First costs of assets, labor, salaries, taxespaid, utilities, rents, interest, etc.
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
28/69
28Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Cash Flows
For many practical engineering economyproblems the cash flows must be:
Assumed known with certainty
Estimated
A range of possible realistic values provided
Generated from an assumed distribution and
simulated
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
29/69
29Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Net Cash Flows
A NET CASH FLOWis
Cash InflowsCash Outflows
(for a given time period) We normally assume that all cash flows
occur:
At the ENDof a given time period
End-of-Period Assumption
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
30/69
30Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 End-of-Period Assumption
END-OF-PERIOD Convention
ALL CASH FLOWS ARE ASSUMED TO OCCUR ATTHE END OF AN INTEREST PERIOD EVEN IF THE
MONEY FLOWS AT TIMES WITHIN THEINTEREST PERIOD.
THIS IS FOR SIMPLIFICATION PURPOSES
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
31/69
31Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 The Cash Flow Diagram: CFD
Extremely valuable analysis tool
First step in the solution process
Graphical Representation on a time scaleDoes not have to be drawn to exact scale
But, should be neat and properly labeled
Required on most in-class exams and partof the grade for the problem at hand
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
32/69
32Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Example Cash Flow diagrams
Assume a 5-year problem
The basic time line is shown below
Now is denoted as t = 0
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
33/69
33Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Displaying Cash Flows
A sign convention is applied
Positive cash flows are normally drawnupward from the time line
Negative cash flows are normally drawndownward from the time line
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
34/69
34Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Sample CF Diagram
Positive CF at t = 1
Negative CFs at t = 2 & 3
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
35/69
35Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Problem Perspectives
Before solving, one must decide upon theperspective of the problem
Most problems will present two perspectives
Assume a borrowing situation; for example:
Perspective 1: From the lenders view
Perspective 2: From the borrowers view
Impact upon the sing convention
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
36/69
36Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 LendingBorrowing Example
Assume $5,000 is borrowed and payments are$1,100 per year.
Draw the cash flow diagram for this
First, whose perspective will be used?
Lenders or the Borrowers ? ? ?
Problem will infer or you must decide.
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
37/69
37Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 LendingBorrowing
From the Lenders Perspective
0 1 2 3 4 5
-$5,000
A = +$1,100/yr
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
38/69
38Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Lending - Borrowing
From the Borrowers Perspective
0 1 2 3 4 5
P = +$5,000
A = -$1,100/yr
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
39/69
39Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Example 1.17
A father wants to deposit anunknownlump-sum amount into an investmentopportunity 2 years from nowthat is large
enough to withdraw $4,000 per year for stateuniversity tuition for 5 years starting 3 yearsfrom now.
If the rate of return is estimated to be 15.5%
per year, construct the cash flow diagram.
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
40/69
40Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.10 Example 1.17 CF Diagram
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
41/69
41Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Interest Rate and Rate ofReturn
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
42/69
42Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Interest Rate
INTEREST -MANIFESTATION OF THETIME VALUE OF MONEY. THE AMOUNTPAID TO USE MONEY.
INVESTMENT
INTEREST = VALUE NOW - ORIGINALAMOUNT
LOAN
INTEREST = TOTAL OWED NOW - ORIGINALAMOUNT
RENTAL FEE PAID FOR THE USE OF SOMEONEELSES MONEYEXPRESSED AS A %
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
43/69
43Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Interest Rate
INTEREST RATE- INTEREST PERTIME UNIT
AMOUNTORIGINAL
UNITTIMEPERINTERESTRATEINTEREST
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
44/69
44Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Interest Rates and Returns
Interest can be viewed from twoperspectives:
Lending situation
Investing situation
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
45/69
45Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Interest - Lending
You borrow money (renting someoneelse's money)
The lender expects a return on the moneylent
The return is measured by application ofan interest rate
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
46/69
46Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
InterestLending Example 1.3
Example 1.3
You borrow $10,000 for one full year
Must pay back $10,700 at the end of oneyear
Interest Amount (I) = $10,700 - $10,000
Interest Amount = $700 for the year
Interest rate (i) = 700/$10,000 = 7%/Yr
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
47/69
47Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Interest Rate - Notation
For 1.3 the interest rate is..
Expressed as a per cent per year
Notation
I= the interest amount is $
i= the interest rate (%/interest
period)
N= No. of interest periods (1 for thisproblem)
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
48/69
48Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
InterestBorrowing (Ex 1.3)
The interest rate (i) is 7% per year
The interest amount is $700 over one year
The $700 represents the return to the
lender for this use of his/her funds for oneyear
7% is the interest rate charged to the
borrower
7% is the return earned by the lender
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
49/69
49Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
InterestExample 1.4
Borrow $20,000 for 1 year at 9% interestper year
i = 0.09 per year and N = 1 Year
Pay $20,000 + (0.09)($20,000) at end of1 year
Interest (I) = (0.09)($20,000) = $1,800
Total amt. paid one year hence
$20,000 + $1,800 = $21,800
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
50/69
50Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.4 InterestExample 1.4
Note the following
Total Amount Due one year hence is
($20,000) + 0.09($20,000)
=$20,000(1.09) = $21,800
The (1.09) factor accounts for the repaymentof the $20,000 and the interest amount
This will be one of the important interestfactors to be seen later
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
51/69
51Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
1.4 InterestInvesting Perspective
Assume you invest $20,000 for one year in aventure that will return to you, 9% per year.
At the end of one year, you will have:
Original $20,000 back
Plus..
The 9% return on $20,000 = $1,800
We say that you earned 9%/year on the investment!This is your RATE of RETURNon the investment
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
if h di i
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
52/69
52Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Equivalence
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
53/69
53Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
EQUIVALENCE
Example
You travel at 68 miles per hour
Equivalent to 110 kilometers per hour
Thus:
68 mph is equivalent to 110 kph
Using two measuring scales
Miles and Kilometers
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
54/69
54Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
EQUIVALENCE
Is 68 equal to 110?
No, not in terms of absolute numbers
But they are equivalent in terms of thetwo measuring scales
Miles
Kilometers
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
55/69
55Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
ECONOMIC EQUIVALENCE
Economic Equivalence
Two sums of money at two differentpoints in time can be made economicallyequivalent if:
We consider an interest rate and,
No. of time periods between the twosumsEquality in terms of Economic Value
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
56/69
56Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Equivalence Illustrated
Return to Example 1.4
Diagram the loan (Cash Flow Diagram)
The companys perspective is shown
T=0 t = 1 Yr
$20,000 is
received here
$21,800 paidback here
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
57/69
57Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Equivalence Illustrated
T=0 t = 1 Yr
$20,000 is
received here
$21,800 paidback here
$20,000 now is economically equivalent to $21,800one year from now IF the interest rate is set toequal 9%/year
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
58/69
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
59/69
59Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Equivalence Illustrated
If you were told that the interest rate is9%....
Which is worth more?
$20,000 now or
$21,800 one year from now?
The two sums are economically equivalentbut not numerically equal!
Read overExample 1.6
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
60/69
60Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Equivalence Illustrated
To have economic equivalence you mustspecify:
Timing of the cash flows
An interest rate (i%per interest period)
Number of interest periods (N)
Read overExample 1.6
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
61/69
61Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Simple and Compound Interest
Two types of interest calculations
Simple Interest
Compound Interest
Compound Interest is more commonworldwide and applies to most analysis
situations
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
62/69
62Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Simple and Compound Interest
Simple Interest
Calculated on the principal amount only
Easy (simple) to calculate
Simple Interest is:
(principal)(interest rate)(time)
$I = (P)(i)(n)
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
McENGINEERING ECONOMY Fifth Edition
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
63/69
63Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
CHAPTER I - Summary
Summary of Important Points
McGrawHill
ENGINEERING ECONOMYFifth Edition
Blank and Tarquin
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
64/69
64Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Chapter Summary
Engineering Economy:
Aplikasi dari kriteria & faktor-faktor
ekonomi untuk mengevaluasialternatif2 yg ada denganmempertimbangkan nilai waktu dari
uang (interest and time)
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
65/69
65Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Chapter Summary
Engineering Economy Study:
Involves modeling the cash flows
Computing specific measures ofeconomic worth
Using an interest rate(s)
Over a specified period of time
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
66/69
66Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Chapter Summary
The MARR
The MARR is a reasonable rate of returnestablished as a hurdle rate to determine if an
alternative is economically viable.
The MARR is always higher than a returnfrom a safe investment.
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
h
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
67/69
67Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Chapter Summary
Attributes of Cash Flows
Difficulties with their estimation.
Difference between estimated and actual
value.
End-of-year conventionfor cash-flow
location.
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
Ch S
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
68/69
68Blank & Tarquin: 5th Edition. Ch. 1 Authored by: Dr. Don Smith, Texas A&M University.
Chapter Summary
Attributes of Cash Flows
Net cash flow computation.
Different perspectives in determining the
cash-flow sign convention.
Construction of a cash-flow diagram.
Introduction to spreadsheet analysis
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
-
8/14/2019 Kuliah 1 - Blankchapter_1-Edit
69/69
End of Chapter I Lecture Set