Engineering Economy: Applying
Theory to Practice 2nd
Chapter 1:
Making Economic Decisions
1
Making Economic Decisions
Engineering economy define &
examples
Decision-making principles
Decision-making process
Decision-making in reality
Role of engineering e

Engineering Economy: Applying
Theory to Practice 2nd
Chapter 8: Benefit/Cost Ratios
and Other Measures
1
Overview of Topics
Define variety of measures
Benefit/cost ratio
Present worth indexes
Future worth
Payback period
Discounted payback period
Breakeven

Engineering Economy: Applying
Theory to Practice 2nd
Chapter 7:
Internal Rate of Return
1
Overview of Topics
Define IRR & state assumptions
Calculate IRR
Simple problems
Loans & leases
Spreadsheets
Problems with multiple sign changes
Project balance over

PP3.1 Example & Exercise
Borrow 15,000 at 10% over 5 years
What is the annual payment? Use factors
Answer
Single final payment, F = 15,000(F/P, 10%, 5)
= 15,000(1.611)
= $24,165
Five equal or uniform payments, A = 15,000(A/P, 10%, 5)
= 15,000(0.2638)
= $3

Assignment 1
1. You are reevaluating the electrical-generator choice that was made last year
when your boss had your job. The promised cost savings have not materialized,
because the generator is too small. You have identified two alternatives.
Alternati

City University of Hong Kong
Department of System Engineering and Engineering Management
Course
SEEM3020 Engineering Economic Analysis (Semester A, 2014-15)
Instructors
Dr. Ken HK Yau
Shuang GENG
Yang ZHAO
Rm: P6612 Tel: 34426158
Email: honkyau@cityu.edu.

Tutorial Class 2
1.
Joe Miner has $3000 in his savings account from an inheritance 10 years ago. If
the savings account pays interest annually at a rate of 5%, how much was
deposited?
2.
Sam borrows $4000 from his parents for his final year of college. He

Project Brief 1
The factory had been opened for two years. During these two years, all group members
also worked in the factory.
After two years, all group members have decided that it is the time to purchase new
computer equipment for their workers. The

Chapter 2 Exercise
1. Grand Junction expectsthe cost of maintaining its sewer lines to be $20K in the rst
year after reconstruction and to increase by $231 each year thereafter until another
major reconstruction after 8 years. Draw the cash ow diagram for

Engineering Economy: Applying
Theory to Practice 2nd
Chapter 2:
Time Value of Money
1
Overview
Define interest rate
Compound vs. simple interest
Cash flow diagrams
Equivalence
What it includes
What it does not include
Nominal & effective interest rates
Ch

City University of Hong Kong
Department of Systems Engineering and Engineering Management
SEEM3020 Engineering Economic Analysis (Semester A, 2014 15)
Project: Office computer equipment investment and financing
Background: Assume your project group member