Course Title : Advanced Engineering and Economy(English lecture)

Code 10i042
Course Year Master and Doctor Course
Term 2nd term
Class day & Period Tue 5th
Location B-Cluster 2F Seminar Room
Credits 2
Restriction The number of students might be limited if too many students will get enrolled.
Lecture Form(s) Lectures, Group works&tasks
Language English
Instructor Juha Lintuluoto, Associate Professor, Department of Synthetic Chemistry and Biological Chemistry

Course Description

Engineering economics plays central role in any industrial engineering project. For an engineer, it is important to apply the engineering know-how with the economic analysis skills to obtain the best available materials, methods, devices, etc. in the most economical way. This course is aimed to teach engineering students the basic economic methods to manage economically an engineering project. In addition, the report writing on various engineering economic issues prepares to write reports in a professional form. The lab sessions are meant for the verbal skills improvement as well as improvement of analytical thinking. The topics are of current relevant topics Small-group brain-storming method is used. The exercise sessions cover the use of Ms-Excel for various quantitative economic analyses.

Grading

Final test, reports, class activity

Course Goals

This course is aimed to strengthen engineering students’ skills in economics. The course concept is to teach students selectively those subjects which serve as major tools to solve economic tasks in engineering environment. The reports and lab sessions provide students stimulating and analytical thinking requiring tasks, and presentation skills training is an important part of this course.

Course Topics

Theme Class number of times Description
Student orientation and Introduction to engineering economy 1 Course contents, goals
Cost concepts and design economics 1 Cost terminology and classification
Cost estimation techniques 1 WBS for cost estimation, estimation techniques (indexes, unit, factor, power-sizing, learning curve, CER, top down, bottom up), target costing
The time value of money 1 Simple interest, compound interest, economic equivalence concept, cash-flow diagrams, PW, FW, AW
Evaluating a single project 1 MARR, present wort method, bond value, capitalized worth, internal rate of return, external rate of return, payback method
Comparison and selection among alternatives 1 Investment and cost alternatives, study period, equal and unequal useful lives, rate-of-return method, imputed market value
Depreciation and income taxes 1 SL and DB depreciation methods, book value, after-tax MARR, marginal income tax rate, gain(loss) on asset disposal, after-tax economic analysis general procedure, EVA,
Price changes and exchange rates 1 Actual dollars, real dollars, inflation, fixed and responsive annuities, exchange rates, purchasing power
Replacement analysis 1 Determining economic life of challenger, determining economic life of defender, abandonment, after-tax replacement study
Evaluating projects with the benefit-cost ratio method 1 Benefits, costs, dis-benefits, self-liquidating projects, multi-purpose projects, interest rate vs. public project, conventional B-C ratio PW and AW method, modified B-C ratio PW and AW method
Breakeven and sensitivity analysis 1 Breakeven analysis, sensitivity analysis, spider plot
Probabilistic risk analysis 1 Sources of uncertainty, discrete and continuous variables, probability trees, Monte Carlo simulation example, decision trees, real options analysis
The capital budgeting process 1 Capital financing and allocation, equity capital and CAPM, WACC, WACC relation to MARR, opportunity cost
Decision making considering multiattributes 1 Non-compensatory models (dominance, satisficing, disjunctive resolution, lexicography), compensatory models (non-dimensional scaling, additive weight)
Final test 1 90 minutes, concept questions, calculation task (option of choice)
Additionally, students will submit three reports during the course on given engineering economy subjects. Also, required are the five lab participations (ca.60 min/each) for each student. Additionally, three exercise sessions (ca.60 min/each), where use of Ms-Excel will be practiced for solving various engineering economy tasks, should be completed

Textbook

Engineering Economy 15th ed. William G. Sullivan (2011)

Textbook(supplemental)

Will be informed if necessary.

Prerequisite(s)

-This course is highly recommended for those who attend “Project Management in Engineering course , Small group working method

Independent Study Outside of Class

Web Sites

The web-site is listed in the home page of the GL education center.

Additional Information

Students are requested to check in advance whether the credits of this course are counted as the units for graduation requirement at department level. The course starts on Oct.2nd.