ABSTRACT
Engineering economics is a subcategory of economics that is specifically designed for the engineering professions. The essential idea behind engineering economics is that money generates money. This chapter focuses on the present and future value of money, interest, and various payment structures as they relate to safety. When borrowing money, the lender will, under normal circumstances, charge interest on that money. When the loan is paid back, the borrowed amount and the interest rate are paid back. Most lenders charge interest by using compound interest methods, which means that in addition to the principal, the amount of interest charged also is charged interest. This addition is called compounding. The sinking fund factor is considered to be the inverse of the series compound factor. This equation is used whenever safety professionals would like to determine the amount of each payment. The series present worth factor is the corresponding inverse of the capital recovery factor.
