Engineering Economics

Introduction §

1. Define engineering economics.
2. Principles of engineering economics.
3. Roles of Engineers in decision making.
4. Scarcity is an emerging issue. (Explain)
5. Knowledge of engineering economics help in decision making process.

Interest & Time Value of Money §

1. Simple Interest
2. Compound Interest
   1. Nominal Interest Rate
   2. Effective Interest Rate
   3. Continuous Compounding
3. Economic Equivalence

Basic Methodologies of Engineering Economic Analysis §

1. MARR
2. Payback Period Method
3. Equivalent Worth Methods
   1. Present Worth
   2. Future Worth
   3. Annual Worth
4. Rate of Return Method 4. [ ] IRR 5. [ ] ERR
5. Public Sector Economic Analysis /BCR/
6. Life Cycle Costing

Comparative Analysis of Alternatives §

1. Mutually Exclusive Alternatives (Same Useful Life)
   1. Payback Period and Equivalent Worth Method
   2. Rate of Return and Benefit Cost Ratio Method
2. Mutually Exclusive Alternatives (Different Useful Life)
   1. Repeatability Assumption
   2. Co-termination Assumption
3. Mutually Exclusive, Contingent and Independent Projects in Combination

Replacement Analysis §

1. Fundamental Concept
   1. Basic concepts and terminology
   2. Approaches for comparing defender and challenger
2. Economic Service Life of Challenger and Defender
3. Replacement Analysis when Required Service Life is Long

Risk Management §

1. Origin/Sources of Project Risks
2. Methods of Describing Project Risks
   1. Sensitivity Analysis
   2. Break-Even Analysis
   3. Scenario Analysis
3. Probability Concept of Economic Analysis
4. Decision Tree Sequential Investment Decision

Depreciation and Corporate Income Tax §

1. Concept of Terminology and Depreciation
2. Basic Method of Depreciation
   1. Straight Line Method
   2. Diminishing/Declining Balance Method/Matheson Method/Constant Percentage Method
   3. Sinking Fund Method
   4. Sum of the Year Digit (SOYD)
   5. Modified Accelerated Cost Recovery System (MARKS)
3. Introduction to Corporate Income Tax
4. After Tax Cash Flow Estimate
5. General Procedure of Making after Tax Economic Analysis
   1. Some Terms and Definitions
   2. General Procedure For ATCF

Inflation & Its Impact on Project Cash Flows §

1. Concept of Inflation
2. Measuring Inflation
3. Equivalence Calculation under Inflation
   1. Different Interest Rate
   2. Adjusted Discount Method
4. Impact of Inflation on Economic Evaluation