COURSE SYLLABUS

IE 305 EngIneerIng EconomIc AnalysIs (3-0) 3

Catalog Data:

Economic analysis for engineering and managerial decision-making. Cash flows, effect of time and interest rate on money and physical assets. Methods of evaluating alternatives: present worth, future worth, annual worth, rate-of-return and benefit/cost ratios. Replacement analysis. Depreciation and taxes. Effects of inflation. Uncertainty and preference under risk.

Textbook:

Sullivan, W.G., Bontadelli, J.A., and Wicks, E.M., Engineering Economy, 11th edition, Prentice Hall, 2000.

References:

· Park, C.S., Contemporary Engineering Economics, 2nd edition, Addison Wesley, 1997.

· Thuesen, G.J., and Fabrycky, W.J, Engineering Economy, 9th edition, Prentice Hall, 2001.

Prerequisites by Topic:

Elementary calculus; introductory probability; experience with spreadsheet packages.

Method for Assessing Student Knowledge of Prerequisite Topics:

None.

Goals:

This course aims to introduce the economic dimension of evaluating and selecting alternative investment projects. By the end of the course, the student will be able to investigate engineering economy problems, and formulate and solve such problems using appropriate conceptual and mathematical skills and modeling structures.

Objectives:

· To give students an understanding of principles and methods necessary to evaluate and select engineering alternatives.

· To help students understand concepts of time value of money and interest rates.

· To give students ability to recognize, formulate, and analyze cash flow models in practical situations.

· To give students ability to analyze cash flow series using present value, future worth, annual worth, and rate of return methods.

· To give students ability to develop cash flow series considering the effects of depreciation, taxes and inflation.

· To give students ability to analyze decision problems related to equipment replacement.

· To help students understand economy studies and investment decisions in the public sector.

· To help students analyze complex decision problems under uncertainty and risk.

Topics:

1. The role of engineers in business and economic analysis for decision making (1/3 weeks)

2. Interest and the time value of money (1 week)

3. Equivalence and interest formulas (8/3 weeks)

4. Methods of evaluating alternatives (3 weeks)

5. Depreciation and taxes (1 week)

6. After-tax analysis (1 week)

7. Inflation (2/3 weeks)

8. Cost of capital (1 week)

9. Equipment replacement analysis (1 week)

10. Public sector engineering decisions and cost/benefit analysis (1 week)

11. Sensitivity, uncertainty and risk analysis (1 week)

Computer Usage:

· To use spreadsheets to prepare homework assignments.

· To access to obtain homework assignments and solutions on the web.

Laboratory Projects:

None.

Contribution to Professional Component:

1. Mathematics and Basic Science 0 credits

2. Engineering Science or Design 3 credits

3. General Education 0 credits