CHE374H1 F Economic Analysis and Decision Making

Engineering Science
Course Outline – Fall 2012
Instructors
Y.A. Lawryshyn, WB256, yuri.lawryshyn@utoronto.ca
C.J. Naus, carl.naus@utoronto.ca

Teaching Assistants
Ali Bashiri, ali.bashiri@mail.utoronto.ca
Patrick Young, pat.young@utoronto.ca

Course Description
Economic evaluation and justification of engineering projects and investment proposals. Cost
estimation; financial and cost accounting; depreciation; inflation; equity, bond and loan financing; after
tax cash flow; measures of economic merit in the private and public sectors; sensitivity and risk
analysis; single and multi-attribute decisions. Applications: retirement and replacement analysis; make-
buy and buy-lease decisions; economic life of assets; capital budgeting; selection from alternative
engineering proposals; production planning; investment selection.

Lectures
Wednesday 6:10 PM – 9:00 PM, WB116

Tutorials
Wednesday 1:10 PM-2:00 PM, SF3202 (and GB412 for quizzes)

Midterm
October 31, 2012, 6:10PM-8:00PM.

Mark Distribution
“Starter” Assignment (group work) 8
Quizzes (during tutorial, best 3 out of 4 x 4 marks each) 12
Problem Sets (group work, 10 x 0.5 mark)* 5
Project (group work) 10
Midterm Exam 20
Final Exam 45
Total 100
* Failure to hand in one problem set will lead to a mark of 0 out of 5.

Text and References

Niall M. Fraser, Elizabeth M. Jewkes, Irwin Bernhardt and May Tajima, Global Engineering
Economics: Financial Decision Making for Engineers, Prentice Hall Canada, Fourth Edition, 2009,
ISBN 978-0-13-207161-1.

Charles Wheelan, Naked Economics: Undressing the Dismal Science, Norton, 2010, ISBN-
10:0393337642, ISBN - 13:9780393337648. (see discussion on quizzes)

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Glossary of financial terms: http://www.investopedia.com/dictionary/

Group Work
Students will be required to form groups of 4 persons and to register their group with the TA during the
first tutorial. The starter assignment and project are group efforts. Also, it is recommended that the
groups work together to solve the problems sets.

Course Outline
The following table outlines the topics to be covered in the course.
Relevant Sections
Item Topic
in Text1
1 Engineering Decision Making Chapter 1
2 Time Value of Money Chapter 2
3 Cash Flow Equivalence Chapter 2
4 Cash Flow and Risk Arbitrage Lecture Notes
5 Cash Flow Analysis Chapter 3
6 Comparison Methods Chapters 4-5
7 Depreciation Chapter 6
8 Financial Accounting Lecture Notes
9 Taxation Chapter 8
10 Inflation Chapter 9
11 Replacement Decisions Chapter 7
12 Dealing with Uncertainty and Sensitivity Analysis Chapter 11
13 Dealing with Risk Chapter 12
14 Qualitative Considerations and Multiple Criteria Chapter 13

Tutorials
Tutorials will be held every week. Approximately every second week there will be a quiz. During the
other tutorials, TAs will be available for general help. Individuals that receive a mark below 70% on
the most recently written quiz will be required to attend the next following tutorial to discuss the
solution. Individuals that fail to attend will receive a score of 0 for that quiz.
Tutorial Schedule:
CHE374 Fall Schedule
Week Date Topic Problem Set Due
1 12-Sep-12 Hand out of starter
2 19-Sep-12 PS1
3 26-Sep-12 PS2
4 3-Oct-12 Starter due, Quiz 1 PS3
5 10-Oct-12 PS4
6 17-Oct-12 Quiz 2 PS5
7 24-Oct-12 PS6
8 31-Oct-12 Midterm (6-8 pm)
9 7-Nov-12 PS7
10 14-Nov-12 Quiz 3 PS8
11 21-Nov-12 PS9
12 28-Nov-12 Project due, Quiz 4 PS10
13 5-Dec-12 Review

1
Some topics are not covered in the text and the student is expected to refer to class notes.

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Each quiz will have a bonus mark question that will be based on specific chapters of the book Naked
Economics, according to the following schedule:

Quiz # Chapters
1 1-3
2 4-6
3 7-9
4 10-13

Problem Sets
Problem sets will be posted on Thursdays and will be due the next week. Problems sets are to be
submitted at the end of the next tutorial, one problem set per group. Each student should retain a copy
of their group’s solutions for reference. Late submission of a problem set (as a group) will lead to a 0/5
(i.e. the members of the group will be assigned a mark of 0 for all problems sets).

Projects
The starter assignment and one project will be required to be completed by each group. All files will
need to be submitted by email to che374@ecf.utoronto.ca according to the following schedule:
 Starter Assignment: 10:00 am, October, 3, 2012
 Project: 10:00 am, November 28, 2012.

Aids Allowed During Quizzes, Midterm and Exam

The following aids are permitted during quizzes, midterms and exams: one 8½ x 11 aid sheet, textbook,
any programmable or non-programmable calculator (no “pocket computers”).

Late Projects, Missed Midterm or Quizzes

Late submission of the project or graded assignments will result in a grade of zero. A student who
misses the midterm for legitimate reasons (illness, family hardship) supported with appropriate
documentation (see Academic Calendar for details) will have the missed marks added to the final exam
(resulting in a final exam weighting equal to 45% plus the missed marks). Missing the midterm for any
other reason will result in a grade assignment of zero. Quizzes will be counted best of 3 out of 4.
Missing one quiz results in a mark being assessed based on the other 3 quiz marks. If two or more
quizzes are missed for legitimate reasons (as discussed), the remainder of the quizzes will be scaled
appropriately for a total quiz mark evaluation of 12.
As discussed above, all individuals must attend the tutorial following the quiz if they receive a mark
below 70%. Failure to attend the tutorial will lead to a mark of 0/4 for that quiz.

Email Correspondence
For privacy purposes, please send emails directly from your utoronto.ca account. Please avoid the use
of other email providers.

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