Engineering economy lorie m. Cabanayan francisco d. Cuaresma

Financing Aspects. The cash requirements and financing leverage of the firm on one hand, 
and the investment policies of financial institutions on the other hand, should be thoroughly 
weighed. The purpose of thus is to obtained adequate financing on the most reasonable terms. 
Financial Projections/Estimates. The selection of the management, marketing, technical, 
and financing specifications is based on mainly on their effects on the profitability and cash 
estimates, which are covered in the financial projections. 
Profitability is the relationship between the capital required to be invested in the project and 
the profit, which can be generated by such project. For a project that is has an investment of 
500,000 and expected to generate an annual profit of 100,000 
– the rate of return on investments 
(ROI) is 500,000/100,000 or 20%. The ROI correlates two sets of figures- the investment required 
by the project and the series of cash, which the project generates. 
Socio-economic Study 
The may be classified as a government or a private project. To a government project, socio-
economic desirability is given first importance and profitability only comes secondary. As such, 
feasibility means socio-economic desirability. 
The private entity on the other hand, ha reserved priority, that is, profitability comes first 
and socio-economic desirability only comes secondary. Thus, feasibility is synonymous with 
profitability. 
In both ways, however, socio-economic desirability is measured in terms of the number of 
workers that shall be employed, and the appropriate annual amount of taxes to be paid by the 
project and the workers of the government. In addition, it is measured by the economic benefits that 
will accrue to the people living in the community and its vicinities. 
Social Desirability. From the viewpoint of government, economic or social planners, 
feasibility means social desirability. Thus, a 30-km road, connecting an agricultural country with a 
shipping port costing of P10, 000,000 may be considered feasible if the road will result in 
substantially more production in the area, given more profits to farmers and drastically reduce the 
selling prices of commodities in the areas. Social desirability in the relationship between the benefit 
to be obtained from the undertaking (i.e. increase in food production, etc.) and the cost of such 
undertaking.