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TANGIBLE AND INTANGIBLE FACTORS

Joshua Argawanon
9/10/2021
https://www.hzu.edu.in/engineering/engineering%20economy.pdf
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HERE WE GO!
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COURSE AGENDA

 Tangible and intangible factors in Engineering

Economics

 7 principles of Engineering Economics

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COURSE OBJECTIVES

 Understand the 7 principles of Engineering Economics

 Know how the 7 principles work

 Learn how tangible and intangible factors affect your decision.

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Tangible

 The most widely accepted definition is ‘a three-dimensional physical item’;

something you can touch. Extended definitions include ‘affected by the law
of gravity’ and so on. In the world of business, we refer to these as physical
assets and they include your traditional fixed assets found on the balance
sheet: Real Estate and Improvements

 Equipment
 Vehicles
 Tools
 Furniture and Fixtures
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Tangible factors

 Balance sheet figures – profit, revenue and cash flow

 Premises

 Stock

 Equipment

 Vehicles

 Cash

 Inflation

 Interest rate

 Demand and supply

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Intangible

 At the other extreme, the best answer is that ‘none of the

five human senses can detect the item’. Makes sense,
because in business, you can’t see or touch the intangible
items. The traditional intangible assets include:

 Patents and Copyrights

 Goodwill

 Closing Costs

 Research and Development Expenditures

 Rights
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Intangible factors

 Goodwill

 Convenience

 Friendship

 Moral

• Relationships with suppliers.

• The value of licenses.

• Any intellectual property patents.

• Quality of staff.

• Level and quality of competition and barriers to market entry for potential new
competitors.
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7 Principle of Engineering Economics

 Develop the Alternative

 Focus on the Differences

 Use a Consistent Viewpoint

 Use a Common Unit of Measure

 Consider All Relevant Criteria

 Make Uncertainty Explicit

 Revisit Your Decisions

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Example:

 Planning to build a house (safe from floods)

Cost to build: 10,000,000.00 Php

Budget: 100,000.00 Php

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Develop alternative

 Know the problem and develop alternatives

Goal: Build a house that is safe from floods.

Issue: Lack of money. Alternatives are your back

up plans.
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Focus on the differences
 Compare each alternatives

Which of the alternatives will you benefit the most?

Consider the effects financially in the long run.

Cheap to build: 80,000.00 Php Cost to build: 125,000.00 Php

Required maintenance 20,000.00 You can loan for the additional budget
PHP yearly. but must pay 5,000 yearly for 5 years.
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Use a consistent viewpoint

 Have a specific point of view.

Whose interest must be followed?

We want a durable house. We want you to save.

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Use a common unit of Measure

 If pesos, then pesos. If dollars, then dollars.

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Consider all relevant criteria

 Don’t forget the other conditions.

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Make uncertainty explicit

 Consider the risks and uncertainties.

Nobody can predict the future. Be ready.

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Revisit your decisions

 Are you sure?

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Icebreaker

 10-15 minute ice breaker – short game/activity/presentation.

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Let’s Practice!

 Case Study discussion related to the topic and Q&A.

 Case Studies should contain guide questions and answer
key.