Fundamentals of Engineering Economics
Introduction
Engineering Economics is a crucial field that uses economic principles to evaluate the feasibility of engineering projects. Understanding the concepts of present and future value of money helps engineers make informed decisions about investments and project viability.
Present Value and Future Value
Present Value (PV) represents the current worth of a sum of money that is expected to be received or paid in the future, discounted at a specific interest rate. Future Value (FV) is the amount of money that an investment made today will grow to over time, given a specific rate of interest. The relationship between PV and FV can significantly impact engineering project evaluations.
Animation of Present vs Future Value
This animation illustrates how money grows over time with different interest rates. Observe the changes in the curves, representing present and future values under various scenarios.
Conclusion
Understanding the fundamentals of engineering economics, particularly the concepts of present and future value, is essential for evaluating engineering projects. By utilizing these principles, engineers can make decisions that are economically sound and beneficial in the long run.