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Unformatted text preview: ISE 460: Engineering Economy University of Southern California Fall 2010 Joseph Chow Week 7: Lecture 11 Announcements • Midterm #1 should be graded by next Tuesday • Future homeworks will be due on Fridays during your discussion – HW #7 will be due on Week 13 Friday instead of Week 12 – HW #8 will be due Week 15 Friday (last discussion of the semester) instead of Week 14 on Tuesday • FYI to the students who thought Midterm #1 was too long – Midterm #2 and Final will 4 questions again, but choose 2 out of 3 to do (and 1 mandatory) • Case Study Due Thursday – Email me your proposal (it should just be 1 page long) – I won’t count you having submitted unless I have the proposal 1pg copy 10/12/10 2 HW Schedule Summary 10/12/10 3 • Lecture 9 – 4.1 – 4.2 – Lecture 10 – 4.3 – 4.4 HW #4, due 10/8/10 note the date change! HW #5, due 10/22/10 (5 problems)  Rate of Return B/C Ratio Depreciation Taxes For Those Interested in This Subject • ISE 561 Economic Analysis of Engineering Projects (3, Sp) Economic evaluations of engineering systems for both government and private industry; quantitative techniques for evaluating nonmonetary consequences; formal treatment of risk and uncertainty. Prerequisite: ISE 460. • http://www.usc.edu/dept/ise/assets/008/6744 5.pdf 10/12/10 4 For Those Interested in This Subject • SAE 599 Economic Considerations for Systems Architecting and Engineering • Course objectives: This course is intended to give the systems architect (SA) or systems engineer (SE) insight into the impact of economic factors in their programs and help them to develop tools to gain an indepth understanding of these factors. The fundamental terms involved in quantitative analysis of cash flow will be covered. Insight into cost estimating techniques will also be covered. The relationship of software and its cost implications will be included. Building on the work that has been done in software cost modeling we will look at its application to systems engineering. 10/12/10 5 The Franz Edelman Award • Award given to projects that apply operations research theories to real problems successfully • http://www.informs.org/AboutINFORMS/Ne 10/12/10 6 Review • Prior – Midterm #1 material • Accounting basics, effective interest rates, time value of money, economic equivalence, and NPW – Annual equivalent worth – This Week – Rate of Return Analysis – Thursday: BenefitCost Analysis 10/12/10 7 RATE OF RETURN ANALYSIS 10/12/10 8 Recall • We introduced Rate of Return Analysis • Criteria based on evaluating the “break even” interest rate representing the return on investment • For simple investments, this is merely solving for i* and setting the IRR = i*, but for more complex investments, you can end up with multiple i* 10/12/10 9 Recall • There are differences between: – i – i* – MARR – IRR 10/12/10 10 Two Things to Take Away Today 1. Knowing how to identify the internal rate of return given a mixed investment 1. Knowing how to compare between mutually exclusive alternatives using IRR approach 10/12/10 11 Paying Attention to Sign...
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This note was uploaded on 10/11/2010 for the course ISE 460 taught by Professor Bottlik during the Spring '06 term at USC.
 Spring '06
 Bottlik

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