ENGR 390
ENGINEERING ECONOMY

Course Description

Time value of money; economic study techniques, depreciation, taxes, retirement, and replacement of engineering facilities.

Topics

• Time value of money formulas
• Application of time value of money formulas
• Project selection using Net Present Worth analysis using the Common Multiple and Study Period methods
• One and two parameter sensitivity analysis
• Bond cash flows and pricing
• Loan amortization and determining the remaining principle on a loan
• Project selection using Annual Equivalent Worth
• Project selection using the incremental Net Present Worth
• Calculate annual depreciation and book value using straight line, declining balance and MACRS methods
• Calculate annual tax cash flow and the after-tax Net Present Worth
• Calculate the discounted Benefit/Cost ratio for a public project and determine if it meets the criterion
• Incorporate inflation in estimating future cash flows
• Conduct a defender/challenger replacement analysis using Net Present Worth

Learning Outcomes

The student, upon completion of this course, will be able to:

• Able to perform economic calculations involving the time value of money using standard formulas and tables.
• Able to compare alternatives and select the optimum alternative using Net Present Worth, Annual Equivalent Worth, incremental analysis and Benefit-Cost analysis.
• Able to determine project related after tax cash flows.
• Able to apply the principles listed in (1) and (2) above in problems involving sensitivity analysis, bonds, loans, inflation and replacement analysis.
• Able to develop economic models for scenarios that require use of a combination of the methods listed above.