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Engineering Economics

Engineering Economics . Questions. What is engineering economics? Who cares about it? Why do engineers have to study it? . Money and Success. This course has to do with money and success. Most of us want some measure of success in life.

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Engineering Economics

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  1. Engineering Economics Valerie Tardiff and Paul Jensen Operations Research Models and Methods Copyright 2004 - All rights reserved

  2. Questions • What is engineering economics? • Who cares about it? • Why do engineers have to study it?

  3. Money and Success • This course has to do with money and success. • Most of us want some measure of success in life. • For better or for worse, money (and economics) has a lot to do with success.

  4. Economics and Engineering • Economics is a big part of an engineer's job. • The engineer must translate scientific ideas in products and systems that better mankind. • Ideas need to make sense economically and the engineer must be able to convince others that this is so. • That is true of any organization that you might join upon graduation.

  5. The Goal • For-profit organizations have for goal to make money - now and in the future. • Not-for-profit must remain financially sound. • Both types must worry about money or they will probably cease to exist.

  6. Economics and World Institutions

  7. Economics and World Institutions • World: International trade, balance of payments, currency evaluation • Federal, State and Local: Tax spending, GNP, distribution of resources, support of institutions, public welfare • Organization: Revenues, costs, profit, return on investment, stock prices • You: Salary, investments, savings, borrowing

  8. Business Decisions are not Simple • Product design • Process design (inspection, operations, raw materials) • Machine selection • Facility design • All decisions are interrelated. You can't make one without affecting many others. This is especially true when multiple products, periods, stages are involved.

  9. The Question is: • How do you operate in this environment? • How does the organization you work for operate? • Engineering economics is entirely involved with evaluating the comparison of alternatives that involve spending money in hopes of earning more.

  10. Engineering Economic Analysis - Seven Steps • Recognize and formulate the problem. • Develop feasible alternatives. • Develop cash flows for each alternative. • Select a criterion (or criteria) for determining the preferred alternative. • Analyze and compare alternatives. • Select the preferred alternative. • Perform monitoring and post-evaluation.

  11. Importance of Learning this Material • The course is about decision making in the environment of an organization (business or government). • The methods have applications to personal decisions as well.

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