lect16 - ISE 460 Engineering Economy University of Southern...

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Click to edit Master subtitle style 12/1/10 ISE 460: Engineering Economy University of Southern California Fall 2010 Joseph Chow Week 10: Lecture 16
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12/1/10 HW Schedule Summary 12/1/10 22 HW #6, due 10/29/10 Lecture 15 6.1 6.2 6.3 6.4
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12/1/10 Case Study Presentation Randomized Order (11/23, Orde r Team Orde r Team 1 Atia 15 Kung 2 Fischer 16 Shanahan 3 Fulcher 17 Onafalujo 4 Marvasti 18 Chapman and Larocque 5 Walker 19 Karafeizis 6 Kolandjian 20 Ramesh 7 Bawdekar 21 Johnson 8 Denari & Blake 22 Fatemi 9 Zhou and Lu 23 Yadav 10 Pottenger 24 Martinez 11 Urruela 25 Bahadori 12 Simon, Selby, Sirois 26 Zhuang and Xu Sangare and 33 Italicized names are DEN presentations.
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12/1/10 Review Prior Discounted cash flow methods Depreciation, Taxes Inflation This Week Uncertainty: Breakeven Analysis, Sensitivity Analysis Probability Refresher 12/1/10 44
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12/1/10 Project Risk & Uncertainty 12/1/10 55
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12/1/10 Recall this Fundamental Principle! Additional risk is not taken without the expected additional return 12/1/10 66
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12/1/10 What if… Your future cash flows are not known with 100% certainty? When you say your Net Present Worth is $2000, what are you assuming? MARR N An 12/1/10 77 What else?
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12/1/10 Methods of Describing Project Risk Sensitivity Analysis – measures the dependence of some output (NPW) to some input variable Break-Even Analysis – identifying thresholds in the input variables corresponding to break even Scenario Analysis – representing the interaction of random input variables as scenarios 12/1/10 88
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12/1/10 Sensitivity Analysis – “what- if analysis” E.g. What if incremental sales are only X+dX units instead of X units?
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