Engineering Economics

Course Objectives:
To provide sound and comprehensive coverage of engineering economics especially. To explain how the business operates, how engineering project decisions are made within the business, and how engineering decisions can affect the bottom line (profit) of the firm. To build a thorough understanding of the theoretical and conceptual basis upon which the practice of financial project analysis is built. To satisfy the very practical needs of the engineer toward making informed financial decisions when acting as a team member or project manager for an engineering project. To incorporate all critical decision-making tools – including the most contemporary, computer–oriented ones such as simulation techniques in risk analysis so that engineers can make informed decision making under uncertainty.

1. Introduction to Engineering Economics(1 hour)
1. Engineering economics
2. Engineering economic decisions


2. Cost Concepts and Behavior(5 hours)
1. Direct material costs
2. Direct Labor costs
3. Manufacturing overheads
4. Non-manufacturing overheads
5. Cost-volume analysis


3. Understanding Financial Statements(6 hours)
1. Balance Sheet
2. Income Statement
3. Cash-flow Statements
4. Financial Ratio Analysis of Companies


4. Time value of Money(6 hours)
1. Compound interest
2. Types of cash flows
3. Single cash-flow
4. Uniform cash-flows, annuity
5. Linear gradient series
6. Geometric Gradient series
7. Irregular cash-flows


5. Project Evaluation Techniques(12 hours)
1. Project cash flows
2. Payback period Method
3. Net present Value Method (NPV)
4. Future Value Method
5. Annual Equivalent Method
6. Internal Rate of Return Method (IRR)


6. Depreciation(3 hours)
1. Straight-line method
2. Declining Balance Method
3. Sum of the digits Method


7. Income Tax & Discounted Cash-flow models(3 hours)
1. Effect of income tax on cash-flows
2. Development of discounted cash-flows models on EXCEL


8. Project Risk Analysis(3 hours)
1. Sensitivity analysis
2. Breakeven analysis
3. Probability concepts and
4. Probability distributions on Excel


9. Economic Analysis in Public Sector(5 hours)
1. Social costs & social Benefits
2. Benefit-cost analysis

References:

1. Chan S. Park, “Contemporary Engineering Economics”, Prentice Hall of India Pvt. Ltd., New Delhi

Evaluation Scheme:
The questions will cover all the chapters in the syllabus. The evaluation scheme will be as indicated in the table below: