02-fundamentals of engineering economy
TRANSCRIPT
02FUNDAMENTALS OF
ENGINEERING ECONOMY
CHE40: Engineering Economy
Engr. Elisa G. Eleazar
Outline
Definition of Engineering Economy
Principles of Engineering Economy
Economic Analysis Procedure
2
Fund
am
entals of Engineering Econom
y
Learning Objectives
Define engineering economy.
State the principles of engineering
economy.
Outline the economic analysis procedure.
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Fund
am
entals of Engineering Econom
y
Definition of Engineering Economy
Engineering the profession in which a knowledge of the
mathematical and natural sciences gained by study, experience and practice is applied with judgment to develop ways to utilize, economically, the materials and forces of nature for the benefit of mankind
Engineering Economy systematic evaluation of the economic
merits of proposed solutions to engineering problems
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Fund
am
entals of Engineering Econom
y
Principles of Engineering Economy
1 Develop the alternatives The choice is among the alternatives. The
alternatives need to be identified and defined for subsequent analysis.
2 Focus on the Differences Only the differences in expected future
outcomes among the alternatives are relevant to their comparison and should be considered in the decision.
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Fund
am
entals of Engineering Econom
y
Principles of Engineering Economy
3 Use a Consistent Viewpoint The prospective outcomes of the
alternatives, economic and other, should be consistently developed from a defined viewpoint or perspective.
4 Use a Common Unit of Measure Using a common unit of measurement to
enumerate as many of the prospective outcomes as possible will simplify the analysis and comparison of the alternatives.
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Fund
am
entals of Engineering Econom
y
Principles of Engineering Economy
5 Consider All Relevant Criteria Selection of a preferred alternative requires
the use of a criterion or several criteria. The decision process should consider both the outcomes enumerated in the monetary unit and those expressed in some other unit of measurement or made explicit in a descriptive nature.
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Fund
am
entals of Engineering Econom
y
Principles of Engineering Economy
6 Make Uncertainty Explicit Uncertainty is inherent in projecting the
future outcomes of the alternatives and should be recognized in their analysis and comparison.
7 Revisit Your Decisions Improved decision making results from an
adaptive process; to the extent practicable, the initial projected outcomes of the selected alternatives should be subsequently compared with actual results achieved. 8
Fund
am
entals of Engineering Econom
y
Economic Analysis Procedure
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Fund
am
entals of Engineering Econom
y
Problem recognition,
definition and evaluation
Development of feasible alternative
Development of the outcomes and cash flows for each
alternative
Economic Analysis Procedure
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Fund
am
entals of Engineering Econom
y
Selection of a criterion (or
criteria)
Analysis and comparison of
the alternatives
Selection of the preferred
alternative
Economic Analysis Procedure
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Fund
am
entals of Engineering Econom
y
Performance monitoring and post-evaluation of results
Outline
Definition of Engineering Economy
Principles of Engineering Economy
Economic Analysis Procedure
12
Fund
am
entals of Engineering Econom
y
References
Sullivan, W., Wicks, E. and Luxhoj, J., Engineering Economy, 12th ed, USA: Pearson Education, Inc., 2003
Blank, L. and Tarquin, A., Engineering Economy, 4th ed, Singapore: McGraw-Hill Book Co, 1998
Eschenbach, T., Engineering Economy Applying Theory to Practice, USA: 1995
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Cost C
oncepts a
nd D
esign Economics
FUNDAMENTALS OF ENGINEERING ECONOMY
CHE40: Engineering Economy
Engr. Elisa G. Eleazar