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Construction Management - II / Basics of Engineering Economics

Performance:Slide501.doc

Engineering Economics
Principles
§ During our examinations we assume a consolidated economy. ( Free of extremities, such as war, hyperinflation, corruption, etc., and fundamentally operated by pure market mechanisms and by stabil legal and regulations’ systems )
§ Our examinations are aiming at economic comparisions of functionally equivalent technical and/or financial options. Figures resulted by any analysis of any option can not be evaluated as themselves but as values to be measured against others.
§ Conclusions of our examinations are at most supporting decision makers at their work when elaborating their market policy and/or strategy, but are
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Zoltán András Vattai

Construction Management - II / Basics of Engineering Economics

Performance:Slide506.doc

Further Terms in Relation with
„Time-Value of Money”
Effective Rate of Interest:
To satisfy arising needs for shorter capital recovery cycles, and for lessening loss in interest in case of capital withdrawal before the end of a nominal period, banks offered a special way of interest calculation …
( t = compoundings in a nominal period; t = 4/12/365; in = „nominal interest” ) ie = ( 1 +

in t t

) –1

⇒ Euler : „e”

Daily Access Rate of Interest: ( id )
Regarding the „limited manner” of Effective
Rate of Interest, and for to substitute the daily compounded (t=365) interest calculations …
( d = number of passed days within a nominal period (typically a year); number of days within a fiscal year 365 (360) ) d id = in ⋅ 365
BUTE DCTM / Engineering Programs in English / 2000-

Dr. Zoltán András Vattai

Construction Management - II / Basics of Engineering Economics

Performance:Slide507.doc

Further Terms in Relation with
„Time-Value of Money”
Substituting Mean Interest: ( im )
An indicatrix characterizing a loan affair in case of rate of interest changing in time …
( k = running index of compoundings ) n im =

n

Π ( 1 + ik ) – 1 k=1 Inflation: ( f )
Specific loss in purchasing power of a currency within a period.
( There can be numerous reasons of it, not all of them negative phenomenon behind )
Net/Real Rate of Interest: ( ir )
Rate of
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