Engineering Economics

Syllabus

1. Introduction (2 hours)
   1. Micro, macro, and engineering economics (History, fundamental principles, and applications)
   2. Terminology related to engineering economics
   3. Economic decisions and the role of engineers in decision-making
   4. Cash flow and cash flow diagrams
2. Market Economics (3 hours)
   1. Market, demand, supply, and their relationships
   2. Elasticity, application of elasticity, and government policies
   3. Externality and market inefficiency
   4. Market failure and firm behavior
3. Cost (2 hours)
   1. Cost classification (Total, average, fixed, variable, marginal; Direct, indirect, standard; Cash vs. book; Sunk, opportunity, life-cycle)
   2. Cost estimation and control
4. Time Value of Money (6 hours)
   1. Money (Types, functions, and time value)
   2. Simple and compound interest (Nominal, effective, continuous)
   3. Economic equivalence
   4. Cash flow types (Single, uniform, linear gradient, geometric gradient, irregular)
5. Methods of Economic Analysis (12 hours)
   1. Capital budgeting and MARR
   2. Payback period, Equivalent worth, Rate of return, Benefit-cost analysis
   3. WACC and repeatability assumptions
   4. Multiple investment project alternatives
6. Replacement Analysis (5 hours)
   1. Replacement strategies and economic service life
   2. Replacement strategy for finite and infinite planning horizons
7. Risk Analysis (5 hours)
   1. Origin of risk in projects
   2. Sensitivity, breakeven, scenario analyses, and decision trees
8. Depreciation and Taxes (5 hours)
   1. Depreciation methods (Straight line, declining balance, sinking fund, sum-of-years'-digits, MACRS)
   2. Tax and after-tax cash flow analysis
9. Measurement of National Income (5 hours)
   1. GDP components and calculations
   2. Unemployment, inflation causes/effects
   3. Real/nominal exchange rates, fiscal budget, monetary policy