New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

IE 383: Engineering Economics - Study Guide

by: India Bergeland

IE 383: Engineering Economics - Study Guide IE 383

Marketplace > Purdue University > Industrial Engineering > IE 383 > IE 383 Engineering Economics Study Guide
India Bergeland
Engineering Economics

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Engineering Economics
Study Guide
50 ?




Popular in Engineering Economics

Popular in Industrial Engineering

This 6 page Study Guide was uploaded by India Bergeland on Thursday October 16, 2014. The Study Guide belongs to IE 383 at Purdue University taught by Kim in Fall. Since its upload, it has received 634 views. For similar materials see Engineering Economics in Industrial Engineering at Purdue University.


Reviews for IE 383: Engineering Economics - Study Guide


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 10/16/14
04232013 76 Intro to taxes taxable income Gross income all expensesexcept for capital cost depreciation deduc ons 77 Federal Tax Find taxable income Find range that taxable income is in and calculate 78 GainLoss on the disposal of an asset Gain loss on disposal MV BV resulting tax liability multiply tax rate by gainloss on disposal 79 After tax analysis Year BTCF Depreciation Taxable Cash flow for ATCF income income taxes K Cash Sum of all BTCF income tax 1 itr inflows depreciation Depreciation ratetaxabe BTCF outflows in year k income itrd A B CAB DtC EAD After tax MARR Before tax MARR1 Effective income tax rate 710 Illustration of computations of ATCFs Calculate present worth of all ATCF s 81 Intro to inflationdeflation General price inflation An increase in the average price paid Leads to reduction in the value of the dollar which means a higher amount of money is needed for the same product General price deflation results in an increase in the value of the dollar InflationDeflation measured by Consumer Price Index CPI measures change in prices paid for selected goods CPI rate CPlb CPlaCPla1OO Producer Price Index PPI measures change in selling prices of items 82 Terminology and basic concepts Actual Dollars A number of dollars in a current time frame Real Dollars R dollars in terms of purchasing power relative to a time period Base time period b Reference point in time to define the purchasing power of real dollars General price inflationdeflation f measure of change in purchasing power Market interest rate lm Interest rate paidearned on A and adjusted for anticipated f Use for actual dollars Real interest rate Ir measures real earning power of money not adjusted for f Use for real dollars Relationship R A1 fquotyear base 83 Fixed and Responsive Annuities Fixed Constant periodic cash flow in actual dollars Unresponsive to inflation Responsive constant cash flow in real dollars Responsive to inflation 86 Foreign exchange rates fe is the annual devaluation rate between foreign country and dollar To calculate exchange rate per period ER ER1fequotN1US 93 Factors to be considered in replacement studies Sunk costs Existing asset value Present market value NOT BV OR SV Economic lives of new assets Remaining life of existing asset Income tax effects Defender the old asset that is being considered for replacement Challenger new asset that is being considered to replace defender J ifm i tIS 1fe Life terminologies Useful life how long we will use it Owenership life how long we will own it Physical life how long its been living Tax life length of time it can be depreciated Economic life length of time possession is economically justifiable Minimum annual cost 94 Typical Replacement Problems 95 Determining economic life of challenger Economic life can be estimated if we know Capital investment Annual expenses Year by year Market values are known can be calculated Ex Determine the economic life of an 800 laptop computer Your personal interest rate is 10 per year Annual expenses and year end resale V x H 9 V V Software upgrade and maintenance 150 200 300 p P I min T glltesale value at Ellld of year 600 450 200 PW 9 999 1 999 199 99 199 439 39991 39991 43999 P 499 199 99 299 419 33994 72979 42949 3 199 199 49 399 595 44793 117979 49329 1 H L999 MVH MFR Loss in lurlarlzet Value dnuriing year b Guest 9f Capital iMl C TEE MV L939 Cost of Capital Ekmnnuall Expenses P PW TciPlF 4 2 me E41 TCPl9 9 0 9949 P39l7l39fk AP 9 96 Determining Economic life for Defender Same as challenger Defender should be kept as long as it s marginal cost is less than minimum EUAC for best challenger 97 Useful lives of defender and challenger differ Repeatability assumption Period is indefinitely long or length of time equal to common multiples of useful lives of alternatives What happens in one useful life span will happen in all the rest For replacement analyses first repeatability assumption ok but second is not for defender because it is an old piece of equiptment Coterminated assumption Finite study period for all alternatives RECOMMENDED for inflationdeflation and taxes 98 Retirement without replacement Abandonment when to retire an asset Abandonment time is year of max PW 99 Aftertax Replacement studies Things to know Income taxes generally mean major cash outflow Taxes have significant effects on cash flows After Tax Cash Flows Capital investment not affected by tax Market Value is taxable Annual expenses are taxable Depreciation deduction generates a tax shield effect If you decide to keep the defender the loss on the disposal turns into opportunity cost O4232013 O4232013


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.