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Ekonomi Teknik [2] September 14, 2008

Posted by desrinda in Ekonomi Teknik.
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TIME VALUE OF MONEY
– amount and timing
– inflation
– opportunity cost

INTEREST
> manifestation of time value of money
> the amount paid to use money
> rental fee paid for the use of other’s money, expressed as A%

INVESTMENT
[interest] = [present value] – [original amount]

LOAN
[interest] = [total owed now] – [original amount]

CASH FLOW DIAGRAM
Engineering Economy had developed a graphical technique for presenting a problem dealing with cash flows and their timing.

INTEREST RATE

Simple Interest => calculated independently for each period, more likely to sharia banking operations.

SI = [principal] x [interest rate] x [time]

e.g.
Borrow USD 1,000 for 3 years at rate 5% per year.
SI = USD 1,000 x 0.05 x 3 = USD 150 paid at the 3rd year, total = USD 1,150

Compound Interest => calculated for each period and added to the principal amount.

e.g.
Borrow USD 1,000 at rate 5% per year.
First year = USD 1,000 + (USD 1,000 x 0.05) = USD 1,050
Second year = USD 1,050 + (USD 1,050 x 0.05) = USD 1,102.50
Thirs year = USD 1,102.50 + (USD 1,102.50 x 0.05) = USD 1,157.625

ASSIGNMENT I (to be submitted on September 20, 2008)

1. Supposed you wanted to be a millionaire at retirement. If an annual compound interest rate of 8% can be sustained over a 40 years period, how much you have to deposit yearly to accumulate $ 1 million?

2. If a fund pays 10% compounded annually, what single deposit now will accumulate $ 12,000 at the end of the tenth year? If the fund pays 5% instead of 10%, how much to deposit to end up with $ 6,000?

3. What equal annual deposits must be made at t = 2, 3, 4, 5 and 6 in order to accumulate $ 15,000 at t = 8 if money is worth 10% compounded annually?

4. Dede borrows $ 15,000 at 15% compounded annually; he pays off the loan over 5 – year period with annual payments. Each successive payment is $ 500 less than the previous one. How much was his first payment?

5. Bono wishes to make a single deposit P at t = 0 into a fund giving 12% compounded quarterly such that $ 1,000 payments are received at t = 1, 2, 3, and 4 (periods are 3 month intervals), and a single payment of $ 7,500 is received at t = 12. What single deposit is needed?

Ekonomi Teknik [1] September 7, 2008

Posted by desrinda in Ekonomi Teknik.
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Buku ajar: Capital Investment Analysis for Engineering and Management, Canada, Sullivan and White, Prentice Hall, 3rd edition, 2004

Pak Farizal, PhD menyampaikan bahwa penilaian akan berdasarkan: Assignment 20%, Project 20%, UTS 25%, UAS 35%.

Grade:
A = 93~100
B = 85~92
C = 70~84
D = 50~69
E = <50

SILABUS

1. Introduction to Engineering Economy
2. Cost Concepts
3. Time Value of Money
4. Equivalent Worth Methods for Comparing Alternatives
5. Rate of Return Methods of Comparing Alternatives
6. Estimating for Economic Analysis
7. Depreciation and Taxes
8. Analyses for Government Agency and Public Utilities
9. Replacement Analysis
10.Capital Planning and Budgeting
11.Risk and Uncertainty
12.Analytical Approach to Risk Analysis
13.Mathematical Programming for Capital Budgeting

SIX CATEGORIES OF COST

> Life cycle cost => first cost (to get the item ready for service), operating dan maintenance cost (required cost to operate and maintain an item during its useful life time), disposal cost (labor and material cost to dispose the item).

> Past cost (service cost, including for predicted future cost) and sunk cost (unrecoverable past cost, contohnya kerugian karena menjual saham terlalu cepat pada saat jika ditahan sebenarnya harganya bisa lebih tinggi).

Contoh: Membeli 100 lembar saham @US 25. Harus membayar USD 85 untuk broker fee dll sehingga total cost adalah USD 2,585.

Kondisi A: Menjual saham sebelum menerima deviden dengan harga USD 35 dan fee USD 105. Jadi USD 2500 dan USD 85 adalah past cost. Tidak ada sunk cost.

Kondisi B: Jika menjual pada saat harga saham USD 20 (plus fee menjadi penerimaan total hanya USD 1,895), maka sunk cost = USD 690.

> Future cost (the true value rarely know with certainty yang meliputi operating cost, maintenance cost, overhaul test, etc but need to be estimated) and opportunity cost.

Opportunity cost is the value of forgoing because (limited) source are spent to a particular alternative.

Contoh: Menyimpan aset senilai USD 1,000 daripada menginvestasikannya ke project yang bisa menghasilkan keuntungan 9%, maka opportunity cost = USD 90.

> Direct cost (directly use to operate specific project or production), indirect cost (difficult to be related directly to operations), overhead cost (general and marketing expenses, utilities, etc). Sometimes called as burden. Biasanya diminimalisasi oleh perusahaan-perusahaan besar melalui merger.

> Fixed cost (does not vary in proportion of the output quantity) and variable cost.

> Average cost (ratio of total cost and output qty, usually decrease with the increasing output qty) and marginal cost (cost required to increase output qty by one unit at a specified level of output).

AC (x) = TC (x)
              ——-
               x

MC (x) = dTC (x)
              ———–
                dx

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