Yeah, so there was this class I had to take while in engineering school called Engineering Economy. It was a class full of present worth’s, future worth’s, P given F’s and F given P’s…all sorts of things that make a college student fall asleep.

Turns out I actually needed to learn that stuff…sort of…

Who knew?

Anyway, I was trying to calculate the value of something x number of years out starting with a given value and a given rate. I know how to do it by hand (spreadsheet) but see, the thing is, I’m lazy. I know there is a formula and that my calculator has it as a pre-programmed input, but who needs that when you have the internet. A few Google clicks later and I had my answer. The same goes with an amortization schedule for a home loan. Oh sure, I can generate one myself, I even wrote a FORTRAN program to do it for me (long time ago kids), but why use my brain?

I felt bad after being so lazy, so I looked up the formula:

Where F is the future value, P is the present value, i is the rate and n is the number of years.

Yep it works.

Also, I found a cool homework assignment that had a great summary and where I found the above equation. Reading through it brought back all sorts of latent memories…man I should have paid more attention in the class. One problem in particular demonstrates why they called this Engineering Economy and it also shows that this stuff is actually useful:

Exercise 2: Your engineering firm needs a rapid prototyping machine. The company gives you two options. In Option 1 you purchase the machine outright for $50,000, pay a maintenance contract of $1,000 per year, and expect to be able to resell the machine after 10 years at a salvage value of $10,000. In Option 2, you lease the machine at $7,000 per year and pay no maintenance, but receive no salvage. Assume that you will be able to take in $8,000 per year in income from this machine. Also assume that an additional option is not to buy the machine at all, but to put the money in the bank at 5% interest. Which option will be best for the firm?

I bet Ken will solve this for me…

Heh, just read this in the homework:

There was a time when every bit of that made sense to me. My poor dying brain…