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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 …show more content…

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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