THE TEN PRINCIPLES

THE TEN PRINCIPLES - EngineeringEconomic TheTenPrinciples...

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1 Engineering Economic  The Ten Principles Professor C. Biancardi Principles of Engineering Economics and Project Management
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2 1. Money has a time value 2. Make investments that are economically justified 3. Choose the mutually exclusive investment alternatives that maximize economic worth 4. Two investement alternatives are equivalent if they have the same economic worth 5. Marginal revenue must exceed marginal cost 6. Money should continue to be invested as long as each additional increment of investment yelds a return that is greater than the investor’s timevalue of money 7. Consider only differences in cash flows among investment alternatives 8. Compares inv alternatives over a common period of time 9. Risks and returns tend to be positively correlated 10. Past costs are irrilevant, unless they impact future costs
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3 Opening Story - Bose Corporation Dr. Amar Bose, a graduate of electrical engineering, an MIT professor, and Chairman of Bose Corporation. He invented a directional home speaker system that reproduces the concert experience. He formed Bose Corporation in 1964 and became the world’s No.1 speaker maker. He became the 288 th wealthiest American in 2002 by Forbes magazine.
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4 Engineering Economics Overview 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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5 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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6 Which Car to Lease? Saturn vs. Honda
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This note was uploaded on 11/08/2010 for the course MECH 414 taught by Professor Biancardi during the Fall '10 term at Manhattan College.

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THE TEN PRINCIPLES - EngineeringEconomic TheTenPrinciples...

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