INDE 301 Engineering Economy – Spring 2021
Instructor: Bacel Maddah
Syllabus
Class Notes, Examples, and Videos
Week 1 Foundations of Engineering Economy (Chapter 1)
Examples on time value of money, simple and compound interest, compounding, establishing MARR, and putting all pieces together.
Week 2 Factors: How time and interest affect money (Chapter 2)
Examples on F/P, P/A for machine valuation, A/F for savings, P/G for bridge maintenance, P/g for ride upgrade, P/A for shifted series, P/A for shifted lease series, and P/g for shifted series.
Week 3 Nominal and Effective Interest Rates (Chapter 4)
Examples on Effective credit card rate, APR and APY of CDs, comparing offers with different CPs, F|A under semiannual compounding, and car loan payments.
Week 4 Present Worth Analysis (Chapter 5)
Examples on comparing equal-life alternatives, comparing unequal-life alternatives, service alternative shorter than study period, revenue alternative shorter than study period, capitalized cost comparison.
Example on finding payback period using Excel
Week 5 Annual Worth and Rate of Return
Set 5.1 Annual Worth Analysis (Chapter 6)
Example on comparing unequal-life alternatives with AW.
Set 5.2 Rate of Return Analysis: Single Alternative (Chapter 7)
Example on finding ROR by hand.
Excel examples on finding ROR for a conventional investment, an unconventional investment with muli ROR sols, and an unconventional investment with single ROR sol.
Week 7 Bonds and Rate of Return Analysis of Multiple Alternatives
Set 7.2 Rate of Return Analysis of Multiple Alternatives (Chapter 8)
Example on Incremental ROR analysis using Excel
Week 8 Benefit/Cost Analysis and Replacement Decisions
Set 8.1 Benefit/Cost Analysis and Public Sector Economics (Chapter 9)
Examples on B/C analysis of a single alternative and multiple alternatives
Set 8.2 Replacement and Retention Decisions (Chapter 11)
Examples on replacement with an identical asset and a nonidentical asset.
Week 9 Introduction to Accounting and Setting the MARR (Chapter 10 and other sources)
Examples on finding a stock cost of capital via CAPM, and setting the MARR based on stock and loan financing.
Week 10 Case Study Project
Week 11 Capital Budgeting and Inflation
Set 11.1 Selection from independent projects under budget limitation (Chapter 12)
Examples of capital budgeting solved using total enumeration and B/C ratio method and ILP
Set 11.2 Effects of Inflation (Chapter 14)
Example of present worth analysis under inflation
Funny video on Hyperinflation in Lebanon (Farid Hobeiche)
Week 12 Sensitivity Analysis and Expected Value Decisions (Chapter 18)
Examples on Spider plot in Excel and E[PW] analysis
Homework Assignments
All assignment should be submitted by email to probhw@gmail.com .
HW 0 Its about you. Please fill and return this form. Due Wed, Feb 3, 2021.
HW 1 1.9, 1.11, 1.23, 1.33 and supplement problem. Due Mon, Feb 8, 2021.
HW 2 2.18, 2.36, 2.47, 3.15, 3.43, 3.50 and supplement problems. Due Mon, Feb 15, 2021.
HW 3 4.14, 4.25, 4.28, 4.52 and supplement problems. Due Wed, Feb 24, 2021.
HW 4 5.14, 5.19, 5.28, 5.37 and supplement problems. Due Wed, Mar 3, 2021.
HW 5 6.18, 6.21, 7.14, 7.16, 7.29 and supplement problems. Due Wed Mar 10, 2021. HW 5 notes: (i) For Problems 5.19, 5.28, 6.18, 6.21, please assume that cash flows repeat over the LCM, (ii) solve Problems 7.14 and 7.16 by hand
HW 6 7.48, 7.49, 8.17, 8.31 and supplement problems. Due Mon Mar 22, 2021.
HW 7 9.20, 9.32, 11.5, 11.9,and supplement problems. Due Mon Mar 29, 2021.
HW 8 10.8, 10.14, 10.22, 10.30, 10.40 and supplement problems. Due Wed Apr 7, 2021.
HW 9 12.17(a), 12.22, 14.13, 14.24, 14.28 and supplement problems. Due Wed Apr 21, 2021.
HW 10 18.6, 18.21 (assume cash flows repeat over LCM), 18.32, and supplement problems. Due Wed Apr 27, 2021.