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tutorial_1 - Tutorial 1 of SEEM2440A/B Concepts Review...

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Tutorial 1 of SEEM2440A/B September 11, 2011 Concepts Review – Principles of engineering economy Principle 1: Develop the alternatives Principle 2: Focus on the differences Principle 3: Use a consistent viewpoint Principle 4: Use a common unit of measure Principle 5: Consider all relevant criteria Principle 6: Make uncertainty explicit Principle 7: Revisit your decisions – Procedure of engineering economic analysis 1. Problem recognition, formulation, and evaluation. 2. Development of the feasible alternatives. (Principle 1) 3. Development of the outcomes and cash flows for each alternative. (Principle 2, 3 and 4) 4. Selection of a criterion (or criteria). (Principles 3 and 5) 5. Analysis and comparison of the alternatives. (Principle 5) 6. Selection of the preferred alternative. (Principle 6) 7. Performance monitoring and post-evaluation of results. (Principle 7) Examples Example 1 MIT has designed an environmentally friendly car which will run on biodiesel. Biodiesel can be produced from the Jatropha plant for about $0.2 per liter and blended with gasoline cost-
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