Engineering Economics Glossary & Flashcards
Engineering Economics Glossary &
Flashcards
36 core terms with clear, original definitions
Original independent resource. All explanations, examples, and practice questions are newly
written for general study. This is not official course material and contains no instructor-provided
assessments, slides, or proprietary content.
Study approach
Read the term, cover the definition, explain it aloud in your own words, then apply it to a small
numerical example. For digital import, use the companion CSV file: first column is the front; second
is the back.
Glossary
Term Definition / recall cue
Minimum attractive rate of return: the benchmark
MARR
return used to evaluate investments.
A time-based sketch showing receipts,
Cash-flow diagram
disbursements, and their timing.
Present worth (PW) The value today of all discounted cash flows.
Present value of benefits minus present value of
Net present value (NPV) costs; accept independent projects when NPV is
nonnegative at the MARR.
Equivalent value of cash flows at a selected future
Future worth (FW)
date.
Equivalent uniform annual amount for a project over
Annual worth (AW)
its life.
Equivalent uniform annual cost; useful for comparing
EUAC
cost-only alternatives.
IRR Interest rate that sets a project NPV equal to zero.
Comparison based on the extra cost and extra
Incremental analysis
benefit of moving from one alternative to another.
Value sacrificed by using a resource in one way
Opportunity cost
rather than its next-best use.
Past cost that cannot be recovered; exclude it from
Sunk cost
forward-looking choices.
Expected net amount recovered at the end of an
Salvage value
asset’s useful life.
First cost Initial investment required at time zero.
Recurring cost to run and maintain an asset or
Operating cost
process.
Annual amount needed to recover an investment and
Capital recovery
earn the required return.
Accounting allocation of asset cost over time;
Depreciation
generally noncash but tax-relevant.
Tax reduction created by deductible depreciation:
Depreciation tax shield
depreciation × tax rate.
Cash flow remaining after considering taxes, often
After-tax cash flow
including the depreciation tax shield.
Actual annual rate after compounding within the
Effective annual rate (EAR)
year.
Original independent study resource | Not affiliated with or endorsed by any university or instructor
Engineering Economics Glossary &
Flashcards
36 core terms with clear, original definitions
Original independent resource. All explanations, examples, and practice questions are newly
written for general study. This is not official course material and contains no instructor-provided
assessments, slides, or proprietary content.
Study approach
Read the term, cover the definition, explain it aloud in your own words, then apply it to a small
numerical example. For digital import, use the companion CSV file: first column is the front; second
is the back.
Glossary
Term Definition / recall cue
Minimum attractive rate of return: the benchmark
MARR
return used to evaluate investments.
A time-based sketch showing receipts,
Cash-flow diagram
disbursements, and their timing.
Present worth (PW) The value today of all discounted cash flows.
Present value of benefits minus present value of
Net present value (NPV) costs; accept independent projects when NPV is
nonnegative at the MARR.
Equivalent value of cash flows at a selected future
Future worth (FW)
date.
Equivalent uniform annual amount for a project over
Annual worth (AW)
its life.
Equivalent uniform annual cost; useful for comparing
EUAC
cost-only alternatives.
IRR Interest rate that sets a project NPV equal to zero.
Comparison based on the extra cost and extra
Incremental analysis
benefit of moving from one alternative to another.
Value sacrificed by using a resource in one way
Opportunity cost
rather than its next-best use.
Past cost that cannot be recovered; exclude it from
Sunk cost
forward-looking choices.
Expected net amount recovered at the end of an
Salvage value
asset’s useful life.
First cost Initial investment required at time zero.
Recurring cost to run and maintain an asset or
Operating cost
process.
Annual amount needed to recover an investment and
Capital recovery
earn the required return.
Accounting allocation of asset cost over time;
Depreciation
generally noncash but tax-relevant.
Tax reduction created by deductible depreciation:
Depreciation tax shield
depreciation × tax rate.
Cash flow remaining after considering taxes, often
After-tax cash flow
including the depreciation tax shield.
Actual annual rate after compounding within the
Effective annual rate (EAR)
year.
Original independent study resource | Not affiliated with or endorsed by any university or instructor
