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Description: Principles of economic equivalence, time value of money, analysis of single and multiple investments, comparison of alternatives; capital recovery and tax implications; certainty; uncertainty; risk analysis; public sector analysis and break-even concepts.
PREREQUISITES
MATH 152
COURSE OBJECTIVES
- To be able to choose and calculate the appropriate measure(s) of merit.
- To be able to understand and use the time value of money concepts.
- To understand economic analysis techniques.
- To be able to build spread sheet models that will aid the economic analysis.
TEXTBOOK AND ADDITIONAL COURSE MATERIAL
Engineering economy - 5th Edition, Leland Blank and Anthony Tarquin, McGraw-Hill, 2002, ISBN 0-07-243234-9.
TOPICAL OUTLINE
- Economic factors and their use
- Combining factors
- Nominal and effective interest rates
- Present and annual worth analysis
- Single project and multiple alternatives rate of return
- Benefit/cost analysis
- Replacement and retention decisions
- Breakeven analysis
- Depreciation methods
- After-tax economic analysis
CLASS SCHEDULE
Tuesdays and Thursday: 11:10 a.m. - 12:20 p.m.
PROFESSIONAL COMPONENT
Students are prepared for engineering practice through a curriculum based on knowledge and skills acquired in earlier course work and incorporating engineering standards.
PROGRAM OUTCOMES
A. An ability to apply knowledge of mathematics, science, and engineering - Primary Outcome.
In the first four chapters of the current text, students are exposed to the derivations of the time value of money relationships. The knowledge of, and understanding of these derivations requires the student to put to practice aspects of calculus, limits, algebraic manipulations and the ability to relate those derivations and their respective assumptions to the essential time value of money relationships.
B. An ability to design and conduct experiments, as well as to analyze and interpret data.
The analysis of the variety of engineering economic analysis problems requires the student to evaluate the context of the problem description and relate the described situation via a cash flow diagram (static model). In effect, a model design is required from a written problem description. For some problems, instructors relate the "sensitivity" of certain problem parameters and their respective impact on the solution. This is especially prevalent in the study of internal rate of return where varying interest rates are presented and their associated impact(s) on the net present value of the modeled problem. Thus, the interpretation of data as related to two dimensional plots is an important aspect of segments of this course.
C. An ability to design a system, component, or process to meet desired needs.
This aspect is emphasized within the context of presenting a variety of problems where an end result is required. Specifically, problems dealing with bond problems, internal rate of return problems and some classes of after-tax cash flow utilize the "goal seek" function of Excel to achieve a desired outcome. However, for this course, there is limited opportunity for the actual design of a system per se. The course is more analytical assessment based by the nature of the material.
D. An ability to function on multi-disciplinary teams.
In many of the undergraduate sections, students receive instruction and guidance in the team approach. Numerous class sessions or part of sessions are devoted to teams of student working on a prescribed problem. Thus, the concept of teaming is re-enforced in this course.
E. An ability to identify, formulate, and solve engineering problems - Primary Outcome.
This course is totally devoted to the above issues. All chapters include problem situations requiring thought and application of the specific issues presented in each chapter.
F. An understanding of professional and ethical responsibility.
During segments of certain problems, the instructor raises ethical issues such as specifying the "cheapest" materials as opposed to higher quality material when performing incremental analysis. The notion of sound engineering design and ethical conduct during the design phase of life cycle costing is presented to re-enforce the same principles.
PREPARED BY: Don Smith DATE: 9-19-03
