Professional Documents
Culture Documents
Engineering Economics: University of Sharjah Dept. of Civil and Env. Engg
Engineering Economics: University of Sharjah Dept. of Civil and Env. Engg
Engineering Economics
Education:
Ph.D. (2008-2011): • Contact Detail:
The University of Tokyo
• Email: msiddique@sharjah.ac.ae
M.Sc. (2005-2007): • Phone: 06-5050943
The University of Tokyo
B.Sc. (2000-2004):
UET Lahore
Class Rules
Come in time
No disturbance during lecture
Bring your text book, class notes, note book, pen and
calculator
DO NOT MISS YOUR QUIZ AND MID EXAM
4
Engineering Economics-0401301
Detailed Topics
The following topics will be addressed during lectures
Introduction to Engineering Economics
The decision making process
Cost estimation
Interest and Equivalence
Different interest formulae
Present worth analysis
Uniform cash flow analysis
Benefit cost analysis
Rate of return analysis
Depreciation
5
Engineering Economics-0401301
Components of the Assessment
The final course mark will be made up as follows:
Quizzes 20%
Midterm test 20%
Assignment/ tutorial 15%
Final Exam 45%
6
Text and Reference Books
1. Engineering Economic Analysis by 2. Engineering Economy By Leland
Donald G Newman, Ted G. Blank & Anthony Tarquin, 7th Ed
Eschenbach & Jerome P. Lavelle
Reference Books
Any other standard book on engineering economics &
7
You may get help from Google search engine
Tentative Course Schedule
Topics
Week Week Starting Comments
Engineering Economics - 0401 301 01
Thus this course may also offer you an economic analysis tool
for making decisions such as car purchase, house purchase,
and major purchase on credit card etc
9
Engineering Economics and Decision Making
Decision Making is broad topic.
It’s is a major aspect of every
human existence. We are
surrounded by sea of problems
which may be classified depending
on difficulty level as given below;
1. Simple Problems
2. Intermediate Problems
3. Complex Problems
11
Engineering Costs
Sunk Cost: A sunk cost is money already spent as a result of past
decision.
Opportunity cost: An opportunity cost is associated with using a
resource in one activity instead of another.
Recurring and Nonrecurring costs
Recurring costs refers to any expense that is know and anticipated and that
occurs at regular interval.
Nonrecurring costs are one-of-a-kind expenses that occur at irregular
intervals and thus are sometimes difficult to plan for or anticipate from a
budgeting perspective.
12
Cost Estimating
Types of Estimates
1. Rough Estimate
2. Semi-detailed estimate
3. Detailed estimate
Estimating Models
1. Per unit model
2. Segmenting model
3. Cost indexes
4. Power-sizing model
5. Triangulation
6. Improvement and learning curve
13
Cash Flow Diagram (CFD)
Cash flow diagrams visually represent income and expenses over some
time interval.
It is graphical representation of cash flows drawn on the y-axis and a time
scale along x-axis.
14
Cash Flow Diagram (CFD)
Categories of Cash Flows
The expenses and receipts due to engineering projects usually fall into one
of the following categories:
First cost: expense to build or to buy and install
Operations and maintenance (O&M): annual expense, such as electricity,
labor, and minor repairs
Salvage value: receipt at project termination for sale or transfer of the
equipment (can be a salvage cost)
Revenues: annual receipts due to sale of products or services
Overhaul: major capital expenditure that occurs during the asset’s life
Revenue
15
Interest
1. Simple interest
Simple interest is computed only on original sum (principal), not on prior
interest earned and left in the account.
A bank account, for example, may have its simple interest every year: in this
case, an account with $1000 initial principal and 20% interest per year
would have a balance of $1200 at the end of the first year, $1400 at the end
of the second year, and so on.
2. Compound Interest
Compound interest arises when interest is added to the principal of a
deposit or loan, so that, from that moment on, the interest that has been
added also earns interest. This addition of interest to the principal is
called compounding.
A bank account, for example, may have its interest compounded every year:
in this case, an account with $1000 initial principal and 20% interest per
year would have a balance of $1200 at the end of the first year, $1440 at
the end of the second year, and so on.
16
Uniform Series Formula
A A
F
0 1 2 n-1 n 0 1 2 n-1 n
P
i(1 + i )n
= F [A / F , i %, n] = P( A / P, i %, n )
i A = P
A = F
(1 + i ) − 1 (1 + i ) − 1
n n
17
Arithmetic Gradient Series
(1 + i )n − in − 1 (1 + i )n − in − 1
F = G = G[F / G, i %, n] P = G = G[P / G, i %, n]
(1 + i ) i
2 n 2
i
18
Analysis Techniques
Present Worth Analysis
Annual Cash Flow Analysis
Rate of Return Analysis
Incremental Analysis
Other Techniques:
Future Worth Analysis
Benefit-Cost Ratio Analysis
Payback Period Analysis
19
Analysis Types
20
Depreciation
Depreciation is a decrease in value of an asset each year:
a decrease in market value
a decrease in the value to the owner
Important reasons for depreciation include
deterioration
obsolescence
21
Question of the Day ?
Write your impression on need of engineering economics
course for your study?
(only a few lines are enough)
22
That’s all. Have fun…however from next week we will
study well
23
Thank you
Questions….
24