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The Engineering Economic Equations Every Safety Professional Should Know Presented By: Jarred ODell, ASP Safety Director Syracuse Utilities.

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Presentation on theme: "The Engineering Economic Equations Every Safety Professional Should Know Presented By: Jarred ODell, ASP Safety Director Syracuse Utilities."— Presentation transcript:

1 The Engineering Economic Equations Every Safety Professional Should Know Presented By: Jarred ODell, ASP Safety Director Syracuse Utilities

2 House Keeping Please Silence Cell Phones

3 House Keeping Please Silence Cell Phones Sign-in Sheet

4 House Keeping Please Silence Cell Phones Sign-in Sheet Sleeping during the presentation

5 Why Engineering Economics For those of you pursuing your CSP: 7 – 15 questions on the ASP Exam 7 – 15 questions on the CSP Exam For everyone else: Ever buy a car or a house? Who has a credit card?

6 Engineering Economics 0-4

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11 You do not need an app for that!!!

12 Engineering Economics

13 Uff Da! Uff da is an expression of Norwegian origin adopted by Scandinavian-Americans. This exclamation is an announcement that, that person is going into a state of sensory overload.

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15 Uff Da! If you find yourself going into sensory overload and need to ask a question say: Uff Da!

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19 Question: 1

20 Engineering Economics: Q1 A wealthy relative died and left you her estate. You can choose to either accept $6,000,000 today or wait and receive $10,000,000 in five years. Assume the annual interest rate over this period is 10%. You decide to…

21 A wealthy relative died and left you her estate. You can choose to either accept $6,000,000 today or wait and receive $10,000,000 in five years. Assume the annual interest rate over this period is 10%. You decide to: A) Wait the 5 years B) B) Take the money and run C) Do nothing, its probably the same people that brought you the Nigerian Lottery Question 1

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23 Engineering Economics: Q1 You decide to: A) Wait the 5 years B) B) Take the money and run C) Do nothing, its probably the same people that brought you the Nigerian Lottery

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25 Engineering Economics Page 1

26 Engineering Economics Future Present Amount of periodic receipt/payment Number of years* Annual Interest* expressed in decimal form (e.g. 10% =.10) F = P = A = n = i = Page 1

27 Engineering Economics Page 1

28 Engineering Economics

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31 Engineering Economics: Q1 Page 2 10,000,000 6,000,000 N/A 10% or 0.10 5 years

32 Engineering Economics: Q1 6,000,000 (1+ 0.10) 5 10,000,000(1+0.10) -5 Page 2

33 Question: 2

34 Engineering Economics: Q2 You decided to go back to school and eared your Masters Degree in mathematics. Having heard this, your supervisor throws this scenario at you:

35 Engineering Economics: Q2 The chief financial officer of Widget Inc. expects a 10% annual return on investments for all capital projects. What is the maximum cost that will be approved from a project that is expected to save $8,000 per year over 10 years? Assume the project will be fully depreciated in the 10 years. Question 2

36 Uff Da!

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38 Engineering Economics: Q2 F = P = A = i = n = Page 3 N/A ??? $8,000 10% or 0.10 10 years

39 Engineering Economics

40 Engineering Economics: Q3 Page 3

41 Question: 3

42 Engineering Economics: Q3 You recently obtained 6σ Black Belt status. Congratulations! Understandably, you are very anxious to test out your new skills. Soon you face this problem:

43 Engineering Economics: Q3 The financial policy of Acme requires that capital investments must have an annual return of 12%. An engineering solution to a safety problem will cost $250,000 for the initial installation, and it will cost $12,000 annually to maintain for 15 years. What is the required annual savings from this project in order for it to be approved? Question 3

44 Engineering Economics: Q3 F = P = A = i = n = Page 4 N/A $250,000 ??? 12% or 0.12 10 years

45 Engineering Economics

46 Engineering Economics: Q3 Page 4

47 Engineering Economics: Q3

48 Question: 4

49 Engineering Economics: Q4 Having recently been conferred as a Doctor in Safety and Engineering Science, your are now in a position to poses this scenario to your employer:

50 Engineering Economics: Q4 Your company decided to hire an EHS/6σ, executive. If a balloon payment of $10,000,000 is due in 10 years, what amount would management have to deposit monthly into a savings account (paying interest of 6% per year) to accumulate adequate funds to pay the note? Question 4

51 Engineering Economics: Q4 F = P = A = i = n = Page 5 $10,000,000 N/A ??? 6% or 0.06 10 years

52 Engineering Economics

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54 Future Present Amount of periodic receipt/payment Number of years* Annual Interest* expressed in decimal form (e.g. 10% =.10) F = P = A = n = i = Page 1

55 Engineering Economics

56 Question: 5

57 Engineering Economics: Q4 One of your faceless pawns is having trouble figuring out the following scenario. He humbly/fearfully asks for your help:

58 Engineering Economics: Q5 Calculate the monetary value after ten years of a behavior based safety program that costs $40,000 per year at the start. Assume an inflation rate of 4.3% Question 5

59 Engineering Economics: Q4 F = P = A = i = n = Page 5 ??? N/A $40,000 4.3% or 0.043 10 years

60 Engineering Economics

61 Engineering Economics: Q5

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65 Uff Da!

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