Cash flow refers to the inflows and outflows of money over a specific period. In engineering economics, cash flow is essential in evaluating the financial viability of a project or investment.
Risk and uncertainty are inherent in engineering projects and investments. Engineering economics provides tools and techniques to evaluate and manage risk and uncertainty. 7 principles of engineering economics with examples
Suppose a company is considering a new project that requires an initial investment of \(50,000. The project is expected to generate annual cash inflows of \) 15,000 for 5 years. The cash flow statement for this project would be: Year Cash Inflow Cash Outflow Net Cash Flow 0 $0 $50,000 -$50,000 1 $15,000 $0 $15,000 2 $15,000 $0 $15,000 3 $15,000 $0 $15,000 4 $15,000 $0 $15,000 5 $15,000 $0 $15,000 Principle 4: Risk and Uncertainty Cash flow refers to the inflows and outflows