Z94.7 ENGINEERING ECONOMY

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EARNINGS VALUE (EARNING POWER OF MONEY). The present worth of an income producer’s estimated future net earnings as predicted on the basis of recent and present expenses and earnings and the business outlook. 

ECONOMIC LIFE. The period of time, extending from the date of installation to the date of retirement from the intended service, over which a prudent owner expects to retain an equipment or property so as to minimize cost or maximize net return.  (See LIFE.)

ECONOMY. (1)  The cost or net return situation regarding a practical enterprise or project, as in economy study, engineering economy, or project economy. (2) A system for the management of resources. (3) The avoidance of (or freedom from) waste in the management of resources. 

EFFECTIVE INTEREST. (See INTEREST RATE, EFFECTIVE.)

EFFECTIVENESS. In engineering economy, the measurable consequences of an investment not reduced to monetary terms; e.g., reliability, maintainability, safety. 

ENDOWMENT. A fund established for the support of some project or succession of donations or financial obligations. 

ENDOWMENT METHOD. As applied to an economy study, a comparison of alternatives based on the present worth or capitalized cost of the anticipated financial events.

ENGINEERING ECONOMY. (1)  The application of economic or mathematical analysis and synthesis to engineering decisions. (2) A body of knowledge and techniques concerned with the evaluation of the worth of commodities and services relative to their costs and with methods of estimating inputs.

 EQUIVALENT UNIFORM ANNUAL COST (EUAC). (See ANNUAL COST.) 

ESTIMATE. A magnitude determined as closely as it can be by the use of past history and the exercise of sound judgment based upon approximate computations, not to be confused with offhand approximations that are little better than outright guesses. 

EXCHANGE RATE. The rate at a given point in time at which the currency of one nation exchanges for that of another.

EXPECTED YIELD. In finance, the ratio of the expected return from an investment, usually on an after-tax basis, divided by the investment. 

EXTERNAL RATE OF RETURN. A rate of return calculation which takes into account the cash receipts and disbursements of a project and assumes that all net receipts (cash throwoffs) are reinvested elsewhere in the enterprise at some stipulated interest rate.  (See RATE OF RETURN, INTERNAL RATE OF RETURN.)

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