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Engineering Economics, Excel
Cost of Loosing One Semester
Some Excel Financial Functions
Type = 0 or not entered E
Set type equal to If payments are due0 or omitted At the end of the period1 At the beginning of the period
Present Value Example
Cost today of a loan for five terms where you are paying 250 at the end of each period
The formula was preceded with a minus to compensate for the negative sign of excel
i 0.12 PV $901.19n 5A 250
Present Value Example
Cost today of a loan for five terms where you are paying 250 at the beginning of each period
The formula was preceded with a minus to compensate for the negative sign of excel
i 0.12 PV $1,009.34n 5A 250
Some Excel Financial Functions
Future Value Example
Cost at the end of a loan for five terms where you are paying 250 at the end of each period
The formula was preceded with a minus to compensate for the negative sign of excel
i 0.12 PV $1,588.21n 5A 250
Some Excel Financial Functions
Payment
Payment of a loan for five terms where the present value is 901.19
The formula was preceded with a minus to compensate for the negative sign of excel
i 0.12 PV $250.00n 5PV 901.19
Try this old example with excel
A new widget twister, with a life of six years, would save $2,000 in production costs each year. Using a 12% interest rate, determine the highest price that could be justified for the machine. Although the savings occur continuously throughout each year, follow the usual practice of lumping all amounts at the ends of years.
PV -8,222.81FVA 2,000.00n 6.00i 12.00
Try this old example with excel
Find the value in 2002 of a bond described as “Acme 8% of 2015” if the rate of return set by the market for similar bonds is 10%. PV -852.67
FV 1,000.00A 80.00n 14.00i 10.00
Two students, Frank and Mary start they Engineering Studies on the same date and they make the commitment of retiring thirty years after their forecasted graduation date (the date they would graduate if no delays are introduced). This date will not change if any delays make any of them graduate later.
Calculate the difference in their earnings if for some reasons Frank is required to graduate one semester later than what was intended.
The Model
Assumptions: We have a constant inflation You have a yearly Salary Increase greater
than what you loose because of inflation Salary increases and inflation are constant They work for the same company their entire
carrier
One year window
P pattern at Loss 17,867.55first year Registration 2,000.00
Salary Inc. % 5Inflation % 4
Year P Pattern1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Delay 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00No Delay 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
($15,867.55) ($15,867.55) 4,000.00 4,000.00 4,000.00 4,000.00 0.00 0.00 0.00 0.00 0.00 0.00
Three year window
P pattern at Loss 19,400.61first year Registration 2,000.00
Salary Inc. % 5Inflation % 4
Year P Pattern1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Delay 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00No Delay 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
($15,867.55) ($15,867.55) 4,000.00 4,000.00 4,000.00 4,000.00 0.00 0.00 0.00 0.00 0.00 0.00
2 4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct4,000.00 4,000.00 4,000.00 4,000.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.004,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00
($762.86) ($793.38) 200.00 200.00 200.00 200.00 0.00 0.00 0.00 0.00 0.00 0.00
3 4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct4,200.00 4,200.00 4,200.00 4,200.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.004,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00
($770.20) ($833.05) 210.00 210.00 210.00 210.00 0.00 0.00 0.00 0.00 0.00 0.00
Thirty year windowP pattern at Loss 43,243.31first year Registration 2,000.00
Salary Inc. % 5Inflation % 4
Year P Pattern1 Jan Feb Mar Apr May Jun Jul Aug Sep
Delay 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00No Delay 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
($15,867.55) ($15,867.55) 4,000.00 4,000.00 4,000.00 4,000.00 0.00 0.00 0.00 0.00 0.00
2 4 Jan Feb Mar Apr May Jun Jul Aug Sep4,000.00 4,000.00 4,000.00 4,000.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.004,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00 4,200.00
($762.86) ($793.38) 200.00 200.00 200.00 200.00 0.00 0.00 0.00 0.00 0.00
3 4 Jan Feb Mar Apr May Jun Jul Aug Sep4,200.00 4,200.00 4,200.00 4,200.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.004,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00 4,410.00
($770.20) ($833.05) 210.00 210.00 210.00 210.00 0.00 0.00 0.00 0.00 0.00
4 4 Jan Feb Mar Apr May Jun Jul Aug Sep4,410.00 4,410.00 4,410.00 4,410.00 4,630.50 4,630.50 4,630.50 4,630.50 4,630.504,630.50 4,630.50 4,630.50 4,630.50 4,630.50 4,630.50 4,630.50 4,630.50 4,630.50
($777.60) ($874.70) 220.50 220.50 220.50 220.50 0.00 0.00 0.00 0.00 0.00
5 4 Jan Feb Mar Apr May Jun Jul Aug Sep4,630.50 4,630.50 4,630.50 4,630.50 4,862.03 4,862.03 4,862.03 4,862.03 4,862.034,862.03 4,862.03 4,862.03 4,862.03 4,862.03 4,862.03 4,862.03 4,862.03 4,862.03
($785.08) ($918.43) 231.53 231.53 231.53 231.53 0.00 0.00 0.00 0.00 0.00
6 4 Jan Feb Mar Apr May Jun Jul Aug Sep4,862.03 4,862.03 4,862.03 4,862.03 5,105.13 5,105.13 5,105.13 5,105.13 5,105.135,105.13 5,105.13 5,105.13 5,105.13 5,105.13 5,105.13 5,105.13 5,105.13 5,105.13
