This course aims to teach the basic analytical frameworks and techniques used to evaluate the economic profitability of engineering and other related projects. Furthermore, students will learn the different cost types, tax forms, inflation and interest rates needed to calculate any cash in-and outflows of engineering projects.
The main aims of this course are: to address the problem of scarce resources and show how resources can be allocated efficiently for the profit maximising firm and for society as a whole; to familiarise the student with the role of discounting to take account of the opportunity cost of financial capital; to outline and explain the rules for ranking mutually exclusive projects; to show how risk, uncertainty and inflation are accommodated in the appraisal of projects; and to demonstrate the differences in analysis as regards public versus privately funded projects.
By the end of this course students will be able to:
- Reproduce a detailed knowledge of cost types and cost optimisation techniques taking into account different types of interest rates for a single project and the production of goods
- Explain various evaluation and discounting methods of privately funded projects
- Illustrate an understanding of the background economic theory required for selecting publicly funded projects efficiently in terms of benefit maximisation and resource allocation, respectively, using the Benefit-Cost ratio analysis method;
- recognise factors that contribute to exchange rate fluctuations and inflation/deflation changes
- Compare the different financial options
Learning and teaching methods
2 lectures per week during Semester 2 (Wed and Thurs, 1000-1100), plus tutorials.
Sullivan, W G, et al (2014). Engineering Economy (16th edn), New Jersey: Prentice-Hall. (Main source is therefore not from 2011 but from 2014)
Brown, T (2016). Engineering Economics and Economic Design for Process Engineers. CRC Press
A 45 minute In-Course exam (February/March) (25%)
A 90 minute degree exam (April/May) (75%)