What principle states that money available today is worth more than the same amount in the future?

Time value of money

True or False: In cash flow diagrams, downward arrows represent positive cash flows.

False. Downward arrows represent negative cash flows (expenses or investments).

What does the notation P represent in engineering economics?

Present worth or present value

Fill in the blank: The formula F = P(1 + i)ⁿ represents _____ interest calculation.

Compound

Which factor converts a present amount to future worth?
A) P/F
B) F/P
C) A/P
D) P/A

B) F/P

What type of series has equal payments occurring at regular intervals?

Uniform series

In an arithmetic gradient, when does the first gradient payment occur?

End of period 2

True or False: Simple interest is calculated on principal plus accumulated interest.

False. Simple interest is calculated only on the principal amount.

What does G represent in gradient calculations?

Arithmetic gradient (constant increase in periodic payment)

Which factor would you use to find present worth of a uniform series?
A) F/A
B) A/F
C) P/A
D) A/P

C) P/A

Fill in the blank: (F/P, i, n) = (1 + i)ⁿ is called the _____ factor.

Single payment compound amount

What happens to cash flows in a geometric gradient series?

They change by a constant percentage each period

True or False: Nominal and effective interest rates are always equal.

False. They differ when compounding occurs more than once per year.

What is the relationship between (P/F) and (F/P) factors?

They are reciprocals of each other

When compounding occurs m times per year, what is the effective annual rate formula?

Ieff = (1 + r/m)ᵐ - 1

Scenario: You need $10,000 in 5 years at 6% interest. Which factor helps find today's deposit?

P/F factor

Fill in the blank: The _____ factor helps find equal payments needed to accumulate a future sum.

A/F (sinking fund)

What does continuous compounding formula ieff = eʳ - 1 represent?

Effective rate when compounding occurs infinitely often

True or False: Cash flows are assumed to occur at the beginning of periods unless stated otherwise.

False. Cash flows are assumed to occur at the end of periods.

Which factor converts a present amount into equal periodic payments?
A) P/A
B) A/P
C) F/A
D) P/F

B) A/P

What special condition applies when i = g in geometric gradient calculations?

Use formula P = (A₁ × n)/(1 + i) to avoid division by zero

Scenario: Equipment costs increase 3% annually. What type of gradient series is this?

Geometric gradient

Fill in the blank: Two cash flows are _____ if they have the same economic value.

Equivalent

What must you calculate first when payment and compounding periods differ?

Effective interest rate per payment period

True or False: The A/G factor converts arithmetic gradient to equivalent uniform series.

True

Which produces the highest effective rate for a given nominal rate?
A) Annual compounding
B) Monthly compounding
C) Daily compounding
D) Continuous compounding

D) Continuous compounding

What sign convention is used for money received in cash flow analysis?

Positive (upward arrows)

Scenario: A loan requires monthly payments but compounds daily. What rate should you calculate?

Effective monthly interest rate

Fill in the blank: The capital recovery factor (A/P) helps determine _____ from present worth.

Equal periodic payments