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Lec1 Ch1 PDF
Lec1 Ch1 PDF
Lecture No. 1
Chapter 1
Contemporary Engineering Economics, 6th ed.
Copyright © 2016
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
What Is an Engineering Economic
Decision?
Role of engineers in business
Understanding the term “engineering
economic decision”
An overview of a variety of engineering
economic decision problems
Understanding the fundamental principles of
engineering economics
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Role of Engineers in Business
Create and Design
• Engineering Projects
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Engineering
Economic
Decisions
Investment Marketing
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
What Makes Engineering Economic
Decisions Difficult?
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Accounting Vs. Engineering Economy
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Common Types of Strategic
Engineering Economic Decisions
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Fundamental Principles of
Engineering Economics
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Principle 1: A dollar earned today is worth
more than a dollar earned in the future.
$121
$110 two
one years
$100 year later
today later
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Principle 2: The only thing that matters is the
difference between alternatives.
Option Monthly Monthly Cash Monthly Salvage
fuel cost maintenance outlay at payment value at
signing end of
year 3
Marginal
cost
Marginal
Sales revenue 1 unit revenue
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Principle 4: Additional risk is not taken
without the expected additional return.
Investment Class Potential Expected
Risk Return
o Savings Low/None 1.5%
account (cash)
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved
Two Factors in Engineering Economic
Decisions
• Time
• Uncertainty
Contemporary Engineering Economics, 6th edition Copyright © 2016 by Pearson Education, Inc.
Park All Rights Reserved