2.Engineering20Economic20Analysi

2.Engineering20Economic20Analysi - Construction Cost...

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Dr. Khaled Hyari Department of Civil Engineering The Hashemite University Jordan 2 - Engineering Economic Analysis Construction Cost Analysis and Estimating (0401448) Engineering Economic Analysis 2 - 2 • Is any individual project worthwhile? • Determine whether a proposed solution is financially viable (profitable or not)? • Given a list of feasible projects, which one is the best? • What is the best option between competing solutions to a specific problem? • How does each project rank compared to the others on the list? Introduction
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Engineering Economic Analysis 2 - 3 • Every decision made costs money (an investment). If these decisions are not made wisely, money will be lost with prospects of bankruptcy • Economic Analysis considers the economic viability of each and every investment project such that money is made, not lost • Objective: Strive to secure the highest net return on capital investments which is compatible with the risks incurred Engineering Economic Decision Analysis 2 - 4 Economic Decision Steps Problem (Need or Opportunity) Recognition and Definition Generation of Alternative Solutions Development of Cash Flows for Feasible Alternative Solutions and Information Gathering Economic Evaluation of Alternatives Selection and Implementation of Best Alternative Post-implementation Analysis and Evaluation
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2 - 5 Housing Project A • Construction=10 months • Cost = $10,000/month • Sale Value=$150,000 • Total Cost ? • Profit ? Housing Project B • Construction=20 months • Cost=$10,000/month • Sale Value=$280,000 • Total Cost? • Profit? Project Evaluation (Examples) • Example 2: Project requires an investment of $1,000 today and returns $1,100 in one year – Is it profitable to make such investment? •E xamp le 1 : Engineering Economic Analysis 2 - 6 • Money has a time value • A dollar received tomorrow in not equivalent to a dollar received today (The money have the same nominal quantity but the dollar does not have the same usefulness or buying power) • Because of this value differential we cannot estimate benefits or costs simply by adding dollars amount that are realized in different periods Time Value of Money
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Engineering Economic Analysis 2 - 7 • Not all projects can be described completely in terms of monetary costs and benefits.
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2.Engineering20Economic20Analysi - Construction Cost...

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