MECH6830

Engineering Economic Analysis

10 Units

This course aims at providing the student with advanced concepts of engineering economic analysis and its role in engineering decision making. It is designed to offer the students the tools needed for rigorous presentation of the effect of the time value of money on engineering problem solving and the capacity to act with ethical and efficient professionalism. The tools introduced include present worth analysis, annual cash flow, rate of return, incremental analysis, future worth analysis, and payback period. Additionally, the course also covers topics such as depreciation, after tax analysis, replacement analysis, uncertainty, inflation, deflation, and estimation of future events. The course adds a compulsory knowledge for any project management professional in engineering fields.

Faculty Faculty of Engineering and Built Environment
School School of Engineering
Availability Semester 2 - 2015 (Callaghan Campus)
Learning Outcomes

On successful completion of this course, students will be able to:

  1. Learn to apply knowledge of mathematics, economics, and engineering principles to solve engineering problems.
  2. Understand the major capabilities and limitations of cash flow analysis for evaluating proposed capital investments.
  3. Be able to recognise, formulate, analyse and solve cash flow models in practical situations. Understand the assumptions underlying these models, and the effects on the modelling process when these assumptions do not hold.
  4. Develop the ability to account for time value of money using engineering economy factors and formulas, as well as the implications and importance of considering taxes, depreciation, and inflation.
  5. Apply engineering economic techniques on solving engineering problems by using computer tools such as spreadsheets.
  6. Be able to communicate the results of the modeling process to management and other non-specialist users of engineering analyses in a lucid, informative manner (graphs, tables and/or text).
Content
  • Introduction to decision making process
  • Time value of money, equivalence and compound interest
  • Nominal and effective interest
  • Present and future worth
  • Annual equivalent cash flow
  • Internal rate of return and minimum acceptable rate of return (MARR)
  • Discrete and continuous compounding
  • Incremental rate of return analysis
  • Inflation and deflation
  • Financing
  • Payback period and sensitivity analysis
  • Uncertainty and risk analysis
  • Retirement and replacement analysis
  • Depreciation
  • Income taxes
  • Break-even analysis
  • Cost/benefit analysis
Assumed Knowledge Basic mathematics, such as powers and exponents Linear interpolation Ability to generate and understand simple graphs, Basic Excel manipulation skills Students who have completed MECH4830 are not eligible to enroll in MECH6830.
Assessment Items
  • In Term Test: Class Examination
  • Report: Individual Research Written Report
  • Formal Examination: Final Examination
Contact Hours
  • Lecture: for 3 hour(s) per Week for Full Term
Timetable 2015 Course Timetables for MECH6830

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