ENGINEERING ECONOMY EXAM 2 FULL
REVISION NOTES WITH TIME VALUE OF
MONEY AND CASH FLOW ANALYSIS
CONCEPTS
◉ How is interest calculated?
Answer: Interest = End Amount - Original Amount.
◉ What is the formula for calculating interest rate?
Answer: Interest Rate = (Interest / Original Amount) × 100.
◉ In the sample problem, what was the interest paid on a loan of
₱10,000 that totaled ₱10,700 after one year?
Answer: The interest paid was ₱700.
◉ What is the term for the amount earned over a specific period
expressed as a percentage of the original amount?
Answer: Rate of Return (ROR).
◉ What are cash inflows?
Answer: Cash inflows are revenues, receipts, incomes, or savings
generated by projects and activities that flow in.
, ◉ What are cash outflows?
Answer: Cash outflows are disbursements, costs, expenses, or taxes
caused by projects and activities that flow out.
◉ What is Net Cash Flow (NCF)?
Answer: NCF = Cash inflows - Cash outflows (NCF = R - D).
◉ What does the end-of-period assumption mean?
Answer: It means that all cash inflows and outflows are assumed to
take place at the end of the interest period in which they actually
occur.
◉ What is a cash flow diagram?
Answer: A graphical representation of cash flows drawn on the y-
axis with a time scale on the x-axis.
◉ What should a cash flow diagram include?
Answer: It should include known, estimated, and needed cash flows.
◉ In the example provided, how much was borrowed to purchase a
car?
Answer: $8,500.
REVISION NOTES WITH TIME VALUE OF
MONEY AND CASH FLOW ANALYSIS
CONCEPTS
◉ How is interest calculated?
Answer: Interest = End Amount - Original Amount.
◉ What is the formula for calculating interest rate?
Answer: Interest Rate = (Interest / Original Amount) × 100.
◉ In the sample problem, what was the interest paid on a loan of
₱10,000 that totaled ₱10,700 after one year?
Answer: The interest paid was ₱700.
◉ What is the term for the amount earned over a specific period
expressed as a percentage of the original amount?
Answer: Rate of Return (ROR).
◉ What are cash inflows?
Answer: Cash inflows are revenues, receipts, incomes, or savings
generated by projects and activities that flow in.
, ◉ What are cash outflows?
Answer: Cash outflows are disbursements, costs, expenses, or taxes
caused by projects and activities that flow out.
◉ What is Net Cash Flow (NCF)?
Answer: NCF = Cash inflows - Cash outflows (NCF = R - D).
◉ What does the end-of-period assumption mean?
Answer: It means that all cash inflows and outflows are assumed to
take place at the end of the interest period in which they actually
occur.
◉ What is a cash flow diagram?
Answer: A graphical representation of cash flows drawn on the y-
axis with a time scale on the x-axis.
◉ What should a cash flow diagram include?
Answer: It should include known, estimated, and needed cash flows.
◉ In the example provided, how much was borrowed to purchase a
car?
Answer: $8,500.
