This module locates engineering design in the context of a broad-ranging cost-benefit analysis, through the development of alternative solutions and their evaluation in tems of onward impacts, in a quantitative multi-annual economic reference framework. As such, it recognises the key importance of a common yardstick for costs and benefits involving capital sums such as spent on facilities, and periodic cash flows such as those resulting from improved methods or reduced because of poor quality. It recognises the reality of taxes and of uncertainty in outcomes. Engineering Economy is a core subject in the US ABET scheme for accredititation of professional engineering courses leading to the designation Professional Engineer.

The key elements lie under the following headings: making economic decisions engineering costs and cost estimates interest and equivalence and interest formulas present worth analysis, annual cash flow analysis rate of return analysis, incremental analysis other methods - payback period, sensitivity and breakeven analysis uncertainty depreciation and taxes replacement analyses discount rates: inflation and escalation, selecting the MARR investment analysis in the public sector further topics: rationing capital amongst competng projects; accounting models and engneering economy

On successful completion of this modules studnts should be able to do the following: Explain broadly the role of engineering economy in decison-making involving engineering projects. Perform engineering cost estimation calculations, and discuss the form and relative merits of alternative approaches. Discuss sources of data. Explain time value of money and its significance in engineering decisions. Construct cash flow diagrams and chart cumulative position, Apply discrete cash flow interest rate formulas in a number of settings - single sum, uniform, gradient, geometric, Interchanging values including present/futire/annual sums. Perform present worth analyses and annual worth analyses. Peform rate of return analyses Peform incremental analysis and comment on situations where they are relevant and/or necessary, and why. Perform payback period calculations Perform sensitivity (single and multi-parameter) and breakeven analyses (cost-volume; profit-volume) Explain sources and effects of uncertainty, and apply calculations for risk and uncertainty. Apply discounted decision tree analysis and explain the value of and limitations to this method Apply depreciation and tax calculations in comparison of alternatives Apply replacement analysis techniques. Discuss setting of discount rates, role of inflation and escalation, and alternative approaches to selecting a minimum attractive rate of return Discuss investment analysis in the public sector, with particular reference to approaches for estimating costs and benefits. Apply benefit-cost ratio calculations. discuss cost-effectiveness. Discuss approaches for rationing capital amongst competng projects Discuss value and limitations of accounting models in the context of economic analysis of engneering projects

To generate a questioning attitude towards cost-based evaluation in engineering projects, within a cost paradigm, as well as in consideration of non-cost issues.

Presentation skills

lectures lab/tutorial seessions usng PC students to make presentations of results (eg problems and small assignment) and to take open-floor questioning short mid-term in-class tests especially to probe competence in time value of money calculations early in the module