The most important thing no one discusses in engineering!

During my senior year of computer engineering at Auburn University I had I take this one quarter course (yes, AU was on the quarter system back then).

It was almost nothing. And yet…it’s everything.

I studied Engineering Economics, and something that only took me nine weeks of study, its concepts and equations are something I reach for all the time, both in work and in life.

The name of the course and the corresponding textbook doesn’t do the subject justice, You see this is the class where I was introduced to TVM, the Time Value of Money.

The bedrock concept is that any payment has a present value (PV) as well as a future value (FV). For example, if you had:

• $100 today.
• You were to put it in a bank account with a 7.2% yield.
• According to the equation FV=PV*(1+i)^n, it’s value in 10 years would be $200.

Where TVM begins to sizzle is when you take this simple equation and then dream up bigger scenarios.

Imagine 10 consecutive cash flow payments where each year you put $100 into that same bank (7.2% annual interest). The first payment has 10 years to grow, just like before. Now if we’re talking about figuring out the value of things in ten years…