Engineering Economy Fundamentals - Worked Examples

Example 1 — Assign cash-flow signs: A contractor buys a compactor for PHP 1,200,000 and receives PHP 180,000 salvage after 5 years.

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Example 2 — Place an end-of-year maintenance series of PHP 90,000 for four years on a timeline.

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Example 3 — Identify a sunk cost: PHP 250,000 was spent last month studying a bridge alignment that is now being reconsidered.

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Example 4 — Identify opportunity cost: An owned generator can be sold today for PHP 700,000 or retained for a project.

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Example 5 — Classify costs for concrete-block production: plant lease PHP 300,000/year and materials PHP 42/block.

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Example 6 — Find the incremental first cost between Alternatives A and B costing PHP 2.4 million and PHP 3.1 million.

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Example 7 — Check simple equivalence: Is PHP 100,000 today equivalent to PHP 121,000 in two years at 10% per year?

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Example 8 — Compute present worth of PHP -500,000 now and PHP 650,000 at year 3 using 8% per year.

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Example 9 — Explain why a monthly cash-flow series cannot be discounted directly with a 12% nominal annual rate compounded monthly.

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Example 10 — Frame an equipment decision between renting and buying without calculating yet.

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