Capitalized Value - Engineering Economics Lightboard

[@shdewhwjuwys9489]

This guy just amazingly explaining the topic which my teacher struggled to make understand me, wonderful

[@EngineeringEconomicsGuy]

Thank you for the kind words!

[@alonkulungrai3796]

For me, you are the father of engineering economics.

[@EngineeringEconomicsGuy]

Thank you for the wonderful comment!

[@rwaleed99]

By far! The best engineering economics course EVER

[@EngineeringEconomicsGuy]

Thanks! Awesome comment, I'm glad you like my Channel! Good luck in your course.

[@rwaleed99]

You are welcome, Thank you! Yup I need luck, I'm taking the FE test in a month. I wonder if you teach any other engineering subjects ?

[@EngineeringEconomicsGuy]

I do teach other subjects but not on KZbin...YET! I uploaded 2 Geotechnical Engineering videos to this Channel - go to my main channel page and look for the Geotech Playlist. Hopefully more to come in the next year. Try "enGENIEer" on KZbin for some other Exam prep info kzbin.infoplaylists Good luck on your Exam!

[@rwaleed99]

Thank you so much! I will look into it and I'll be on the lookout of all your new videos :)

[@rwaleed99]

@@EngineeringEconomicsGuy I'm an Electrical Engineer :)

[@ibnuahmedbare1201]

This is amazing !!! I am enjoying the concepts now. wow! I have quick question here. For the effective interest rate, why are you not using the formula: ieff - (1+r/m)^K how is r/m=0.08? it kinda makes sense conceptually because the 8% annual "per year" but then how about the K? how is it 15. is it not suppose to be subperiods*15? I rewatched your other video about nominal and effective interest as well. while it was illuminating enough about this concept, I lost my thought process in this one. Thanks for the help. YOU are videos are amazing. I am glad I found this channel

[@EngineeringEconomicsGuy]

Glad you like the Channel! Yes, the problem in this video is a little unusual. It really hinges around the concept of the present value of a perpetuity. The 8% is an annual rate (it is both the nominal AND the effective rate since there are no sub-periods). The 15 is used to calculate a 'weird' effective-15-year-interest-rate. We need this because we have payments at occur once every 15 years. Give the video another try... the explanation is good. Good luck in your course!

[@radprk42]

this was amazing, thank you for your efforts

[@EngineeringEconomicsGuy]

You're welcome!

[@kennethtruong4307]

For the 15-yr 'cycle' cost can you also use the present worth factor to find the present worth value or do you have to use the capitalized value equation because it involves annuities?

[@EngineeringEconomicsGuy]

Good question. Because the 15 year cycle cost goes on 'forever' you can't use the standard present worth factor; you need to use the 'capitalized value' formula. Notice that I showed 2 ways of doing it!

[@kennethtruong4307]

@@EngineeringEconomicsGuy Oh I see, thanks for the help and I hope you have a nice day! Your lectures are the best!

[@EngineeringEconomicsGuy]

Thank you!!

[@danhtainguyen8547]

Thank you so much sir. Yo has helped me a lot

[@EngineeringEconomicsGuy]

You are most welcome!

[@vishvakvichu4222]

Impressive presentation!

[@EngineeringEconomicsGuy]

Thanks! I hope it was instructive.

[@Iellec342]

what if the annual cost is different per year? would you add it all?

[@EngineeringEconomicsGuy]

Good question. If the annual cash flows are not a constant amount then you can't use the idea of a 'perpetuity' (meaning a repeating amount that goes on "forever"). If the dollar-amounts are different each year, the best you can do is bring each individual cash flow back to the present (using the P/F compound interest factor). You could do this for each cash flow that you know. Excel has the "NPV" function that would come in handy for this task! I have another video explaining that. kzbin.info/www/bejne/hJSyaH-vf6prmKM But, in general, if the annual cash flows are all different values, then you can't apply the calculation shown in this video. Thanks for the question - good luck in your course!

[@EngineeringEconomicsGuy]

By the way, you definitely can't "add" the costs like you mentioned in your original question. I tell my students that the 'golden rule' of engineering economics (and finance) is: You can't add dollar amounts that occur at different points in time! You must always use the 'time value of money' compound interest factors when performing calculations!

[@m.abubakrarqam4278]

do you have any video for comparing alternatives question?

[@EngineeringEconomicsGuy]

Yes, kzbin.info/www/bejne/nWLLemhurMR5qqs This link takes you to a video using Incremental IRR for comparing projects.

[@onefun289]

Thank you sir

[@EngineeringEconomicsGuy]

You are most welcome!

[@albertmungamelo2936]

at 1：30,isnt the P supposed to be negative?... since the money is bieng spent not earned.

[@albertmungamelo2936]

OK i get it ,its positive because the school is yearly bieng Given the money,in general ,the University is receiving $ P yearly ,then it chanels $1,000 to a yearly scholarship at an interest rate of 10% . (meaning $1000 is just 10% of the P(received money by University) may you please....

[@EngineeringEconomicsGuy]

I think you've got it! Good luck in your course!!