8/20/19

Engineering Economy

Engineering - a discipline concerned with the economic aspects of engineering

Economics works. It involves formulating, estimating, and evaluating the

expected economic outcome of alternatives designed to accomplish a
TTh 3:00 – 4:30 pm defined purpose

Engineering Economic Analysis

Present Economy Studies
Procedure
1. Problem recognition, definition, and evaluation
2. Development of the feasible alternatives. - studies where the alternatives for accomplishing a specific task are
3. Development of the outcomes and cash flows for each alternative. being compared over one year or less and the influence of time and
money can be ignored
4. Selection of a criterion (or criteria).
5. Analysis and comparison of the alternatives.
6. Selection of preferred alternative.
7. Performance monitoring and post-evaluation of results.

Problem 1
Two pumps capable of delivering 100 hp to an agricultural application are
being evaluated in a present economy study. The selected pump will only
be utilized for one year, and it will have no market value at the end of the
year. Pertinent data are summarized as follows:
ABC Pump XYZ Pump
Purchase price $2,900 $6,200
Maintenance cost $170 $510
Efficiency 80% 90%
If electric power costs $0.10 per kWh and the pump will be operated 4,000 hours
per year, which pump should be chosen? Recall that 1 hp = 0.764 kW.