ECON320_1_EngineeringEconomicDecisions

ECON320_1_EngineeringEconomicDecisions - Engineering...

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1 Engineering Economic  Decisions Lecture No.1 Professor C. S. Park Fundamentals of Engineering Economics Copyright © 2005
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2 Engineering Economics: Economic analysis for engineering and management decision making Rational Decision-Making Process Economic Decisions Predicting Future Role of Engineers in Business Large-scale Engineering Projects Types of Strategic Engineering Economic Decisions
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3 Rational Decision-Making Process 1. Recognize a decision problem 2. Define the goals or objectives 3. Collect all the relevant information 4. Identify a set of feasible decision alternatives 5. Select the decision criterion to use 6. Select the best alternative
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4 Which Car to Lease? Saturn vs. Honda 1. Recognize a decision problem 2. Define the goals or objectives 3. Collect all the relevant information 4. Identify a set of feasible decision alternatives 5. Select the decision criterion to use 6. Select the best alternative Need a car Want mechanical security Gather technical as well as financial data Choose between Saturn and Honda Want minimum total cash outlay Select Honda
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5 Financial Data Required to Make an Economic  Decision
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6 Decision making problem The minimal necessary and sufficient conditions for the existence of a decision making problem: An individual or individuals who have the problem (decision maker) An outcome that is desired by the decision maker (objective) At least two unequally efficient courses of action which have a chance of yielding the desired objective (alternatives) A state of doubt in the decision maker as to which alternative is the best An environment or context of the problem
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7 Evaluation Criteria To compare different methods of achieving a given objective, it is necessary to have an evaluation criteria. Dollars or TL are used as a basis of comparison and the
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ECON320_1_EngineeringEconomicDecisions - Engineering...

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