Fundamentals of Engineering Economy

Related Resources: Engineering Manufacturing Economy

Fundamentals of Engineering Economy

The need for engineering economy is primarily motivated by the work that engineers do in performing analyses, synthesizing, and coming to a conclusion as they work on projects of all sizes. In other words, engineering economy is at the heart of making decisions. These decisions involve the fundamental elements of cash flows of money, time, and interest rates. This chapter introduces the basic concepts and terminology necessary for an engineer to combine these three essential elements in organized.

Decisions are made routinely to choose one alternative over another by individuals in everyday life; by engineers on the job; by managers who supervise the activities of others; by corporate presidents who operate a business; and by government officials who work for the public good. Most decisions involve money, called capital or capital funds, which is usually limited in amount. The decision of where and how to invest this limited capital is motivated by a primary goal of adding value as future, anticipated results of the selected alternative are realized. Engineers play a vital role in capital investment decisions based upon their ability and experience to design, analyze, and synthesize. The factors upon which a decision is based are commonly a combination of economic and non economic elements.

1. Engineering economics: description and role in decision making process.
2. Performing an Engineering Economy Study.
3. Interest Rate and Rate of Return (ROR).
4. Economic Equivalence.
5. Terminology and Symbols.
6. Simple and Compound Interest.
7. Cash Flows: Their Estimation and Diagramming (CFD).
8. Minimum Attractive Rate of Return (MARR).
9. Spreadsheets use in engineering economy.

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