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Milwaukee School of Engineering

Sep 25, 2017

# IE 423 - Engineering Economy

3 lecture hours 0 lab hours 3 credits
Course Description
This subject is intended to provide the fundamental techniques for quantifying engineering and business decisions, especially those in which the time value of money is significant. It deals with cost, value, and work concepts and emphasizes the applications of funds invested in capital assets and facilities and the returns on such investments. (prereq: sophomore standing)
Course Learning Outcomes
Upon successful completion of this course, the student will be able to:
• Analyze and evaluate financial alternatives by determining the worth of systems, products and services in relation to cost
• Correctly apply discounted cash-flow analysis to evaluate proposed capital investments
• Acquire, analyze and interpret project data
• Recognize, formulate and analyze cash-flow models
• Determine economic feasibility when evaluating alternatives
• Apply sensitivity analysis to economic decision making
• Explain the results of the cash flow models to managers and others not versed in engineering economic analysis

Prerequisites by Topic
• College algebra

Course Topics
• Why engineering economy?
• Interest and interest rate
• Rate of return
• Equivalence
• Engineering economics terminology
• Minimum Attractive (or Acceptable) Rate of Return (MARR)
• Cash flows
• Single-payment factors
• Uniform series present worth factor and capital recovery factor
• Sinking fund factor and uniform series compound amount factor
• Interpolation
• Determination of an unknown interest rate
• Determination of an unknown number of years
• Combining factors
• Nominal and effective interest rates; interest rates varying over time
• Present worth analysis
• Annual worth analysis
• Rate of return analysis
• Benefit-cost ratio analysis
• Breakeven and sensitivity analysis
• Payback period analysis

Coordinator
Leah Newman