ENGG*3240 - Engineering Economics

Course Description

This course covers the principles of project evaluation; analysis of capital and operating costs of engineering alternatives, benefit-cost ratio; break-even studies, evaluations recognizing risk, replacement and retirement of assets; tax considerations, influence of sources of funds.

Learning Outcomes

This course is designed to teach engineers how to evaluate different alternative investments/projects in order to find the one that makes the most economical sense. You will learn about how the value of money changes over time due to interest and inflation. You will also learn how to work with cash flows that take place at different times over the life of the project. This knowledge will then be used with different evaluation techniques to determine whether an investment is worth making.

Course Topics

By the end of this course, you should be able to:

1. Apply the concepts of time-value of money, taking into consideration the impact of interest on investment decisions by comparing between potential candidates and identifying the better investment;

2. Determine the book value of an asset for accounting and tax purposes by applying knowledge of depreciation;

3. Explain how assets having different life expectancies cannot be directly compared through use of common life concepts or by using annual worth comparisons;

4. Evaluate different project/investment opportunities to select the most beneficial by applying the appropriate evaluation method;

5. Determine the rate of return of a project through analysis of cash flows, whether they are positive or negative, and how frequently they change from positive to negative;

6. Select the appropriate evaluation method for comparing between alternate investment opportunities by identifying important factors such as life expectancy and measure of interest (dollar value vs. rate of return);

7. Outline basic accounting concepts through identification of elements of a balance sheet and income statement;

8. Evaluate when an asset should be replaced through the use of replacement analysis both before and after tax by determining its economic life;

9. Determine the after-tax viability of a project through the application of after-tax cash flow analysis using capital tax factors, capital salvage factors, tax rates, and depreciation rates;

10. Calculate asset/project value due to inflation through application of concepts of real dollars versus actual dollars;

11. Recommend public-sector projects to be implemented by applying benefit cost ratio analysis; and

12. Determine appropriate investment to make taking into consideration uncertainty and risk.

Assessment