Engineering Economics Blog

The equations and procedures of engineering economy utilize the following terms and symbols. Sample units are indicated.

     P = value or amount of money at a time designated as the present or time 0. Also   P   is referred to as present worth (PW), present value (PV), net present value (NPV), discounted cash fl  ow (DCF), and capitalized cost (CC); monetary units, such as dollars
     F = value or amount of money at some future time. Also   F  is called future worth (FW) and future value (FV); dollars
     A = series of consecutive, equal, end-of-period amounts of money. Also   A  is called the annual worth (AW) and equivalent uniform annual worth (EUAW); dollars per year, euros per month
     n =  number of interest periods; years, months, days
     i  = interest rate per time period; percent per year, percent per month
     t  = time, stated in periods; years, months, days

 The symbols P and   F  represent one-time occurrences: A occurs with the same value in each interest period for a specifi ed number of periods. It should be clear that a present value P represents a single sum of money at some time prior to a future value F or prior to the fi rst occurrence of an equivalent series amount   A .

   It is important to note that the symbol A always represents a uniform amount (i.e., the same amount each period) that extends through   consecutive  interest periods. Both conditions must exist before the series can be represented by A .

 The interest rate   i  is expressed in percent per interest period, for example, 12% per year. Unless stated otherwise, assume that the rate applies throughout the entire   n  years or interest periods. The decimal equivalent for   i  is always used in formulas and equations in engineering economy computations.

All engineering economy problems involve the element of time expressed as   n  and interest rate   i . In general, every problem will involve at least four of the symbols   P, F, A, n, and   i , with at least three of them estimated or known.

 Additional symbols used in engineering economy are defi ned in Appendix E.

EXAMPLE 1.6 - Terminology and Symbols 

EXAMPLE 1.7 - Terminology and Symbols

EXAMPLE 1.8 - Terminology and Symbols