1、(c) 2001 Contemporary Engineering Economics1FundamentalsofEngineeringEconomics(c) 2001 Contemporary Engineering Economics2IntroductionLecture No.1(c) 2001 Contemporary Engineering Economics3Your Goal -Beer & Pretzels Rich at the age of 60nYour current age: 20 years oldnAmount of savings desired: $1m
2、illionnInterest earned on your savings: 12%nRequired monthly savings (compounded monthly): $85(c) 2001 Contemporary Engineering Economics4Monthly Savings Required(to save $1M at age 60) Starting AgeRequired Monthly Savings (compounded monthly)12%20$8530$28640$1,01050$4,347(c) 2001 Contemporary Engin
3、eering Economics5Conclusion?Start saving Early!(c) 2001 Contemporary Engineering Economics6Returns from Various Investment ClassesAverage Annual Return 1970-1997Best YearWorst yearU.S. Stocks13.0%37.6% (1995)-26.5% (1974)International Stocks12.7%39.4% (1993)-26.2% (1974)Cash Equivalent6.8%14.1% (198
4、1)3.0% (1991)Real Estate8.8%20.5% (1979)-5.6% (1991)U.S. Bonds9.3%33.5% (1982)-5.6% (1994)(c) 2001 Contemporary Engineering Economics7Table of ContentsnChapter 1 Engineering Economic DecisionsnChapter 2 Time Value of MoneynChapter 3 Understanding Money ManagementnChapter 4 Equivalence Calculations u
5、nder InflationnChapter 5 Present-Worth AnalysisnChapter 6 Annual Equivalence AnalysisnChapter 7 Rate-of-Return Analysis(c) 2001 Contemporary Engineering Economics8Table of ContentsnChapter 8 Accounting for Depreciation and Income TaxesnChapter 9 Project Cash Flow AnalysisnChapter 10 Handling Project
6、 UncertaintynChapter 11 Replacement DecisionsnChapter 12 Benefit-Cost AnalysisnChapter 13 Understanding Financial Statements(c) 2001 Contemporary Engineering Economics9Table of Contentsn第一部分第一部分 理解货币及其管理理解货币及其管理n 第一章第一章 经济决策经济决策n 第二章第二章 货币的时间价值货币的时间价值n 第三章第三章 货币管理货币管理n 第四章第四章 通货膨胀下的等值计算通货膨胀下的等值计算n第二
7、部分第二部分 企业与工程资产的评估企业与工程资产的评估n 第五章第五章 现值分析现值分析n 第六章第六章 年金等值分析年金等值分析n 第七章第七章 收益率分析收益率分析(c) 2001 Contemporary Engineering Economics10Table of Contentsn第三部分第三部分 现金流现金流n 第八章第八章 折旧和所得税会计折旧和所得税会计n 第九章第九章 项目现金流量分析项目现金流量分析n 第十章第十章 项目不确定性处理项目不确定性处理n第四部分第四部分 工程经济学中的具体问题工程经济学中的具体问题n 第十一章第十一章 重置决策重置决策n 第十二章第十二章 收
8、益成本分析收益成本分析n 第十三章第十三章 财务报表财务报表(c) 2001 Contemporary Engineering Economics11Chapter 1Engineering Economic DecisionsnRational Decision- making ProcessnThe Engineers Role in BusinessnTypes of Strategic Engineering Economic DecisionsnFundamental Principles in Engineering EconomicsBose Corporation(c) 200
9、1 Contemporary Engineering Economics12Chapter Opening Story - Bose CorporationnDr. Amar Bose, a graduate of electrical engineering, an MIT professor, and Chairman of Bose Corporation.nHe invented a directional home speaker system that reproduces the concert experience.nHe formed Bose Corporation in
10、1964 and became the worlds No.1 speaker maker.nHe became the 288th wealthiest American in 2002 by Forbes magazine.(c) 2001 Contemporary Engineering Economics13Engineering Economics Overview Rational Decision-Making Process Economic Decisions Predicting Future Role of Engineers in Business Large-scal
11、e engineering projects Types of strategic engineering economic decisions(c) 2001 Contemporary Engineering Economics14Rational Decision-Making ProcessRecognize a decision problemDefine the goals or objectivesCollect all the relevant informationIdentify a set of feasible decision alternativesSelect th
12、e decision criterion to useSelect the best alternative(c) 2001 Contemporary Engineering Economics15Which Car to Lease?Saturn vs. HondaRecognize a decision problemDefine the goals or objectivesCollect all the relevant informationIdentify a set of feasible decision alternativesSelect the decision crit
13、erion to useSelect the best alternativenNeed a car nWant mechanical security nGather technical as well as financial datanChoose between Saturn and HondanWant minimum total cash outlaynSelect Honda(c) 2001 Contemporary Engineering Economics16Financial Data Required to Make an Economic Decision(c) 200
14、1 Contemporary Engineering Economics17Engineering Economic DecisionsPlanningInvestmentMarketingProfitManufacturing(c) 2001 Contemporary Engineering Economics18Predicting the FuturenEstimating a Required investmentnForecasting a product demandnEstimating a selling pricenEstimating a manufacturing cos
15、tnEstimating a product life(c) 2001 Contemporary Engineering Economics19Create & Design Engineering ProjectsEvaluate Expected Profitability Timing of Cash Flows Degree ofFinancial RiskAnalyze Production Methods Engineering Safety Environmental Impacts Market AssessmentEvaluate Impact on Financial St
16、atements Firms Market Value Stock PriceRole of Engineers in Business(c) 2001 Contemporary Engineering Economics20PresentFuturePastEngineering EconomyAccountingEvaluating past performanceEvaluating and predicting future eventsAccounting Vs. Accounting(c) 2001 Contemporary Engineering Economics21Two F
17、actors in Engineering Economic Decisions The factors of time and uncertainty are the defining aspects of any engineering economic decisions(c) 2001 Contemporary Engineering Economics22A Large-Scale Engineering ProjectnRequires a large sum of investmentnTakes a long time to see the financial outcomes
18、nDifficult to predict the revenue and cost streams(c) 2001 Contemporary Engineering Economics23Types of Strategic Engineering Economic Decisions in Manufacturing SectorqService Improvement qEquipment and Process SelectionqEquipment ReplacementqNew Product and Product ExpansionqCost Reduction(c) 2001
19、 Contemporary Engineering Economics24Service ImprovementnHow many more jeans would Levi need to sell to justify the cost of additional robotic tailors?(c) 2001 Contemporary Engineering Economics25Equipment & Process SelectionnHow do you choose between the Plastic SMC and the Steel sheet stock for an
20、 auto body panel?nThe choice of material will dictate the manufacturing process for an automotive body panel as well as manufacturing costs.(c) 2001 Contemporary Engineering Economics26Which Material to Choose?(c) 2001 Contemporary Engineering Economics27Equipment Replacement ProblemnNow is the time
21、 to replace the old machine?nIf not, when is the right time to replace the old equipment?(c) 2001 Contemporary Engineering Economics28New Product and Product ExpansionnShall we build or acquire a new facility to meet the increased demand?nIs it worth spending money to market a new product?(c) 2001 C
22、ontemporary Engineering Economics29Example - MACH 3 ProjectnR&D investment: $750 millionnProduct promotion through advertising: $300 millionnPriced to sell at 35% higher than Sensor Excel (about $1.50 extra per shave).nQuestion 1: Would consumers pay $1.50 extra for a shave with greater smoothness a
23、nd less irritation?nQuestion 2: What would happen if the blade consumption dropped more than 10% due to the longer blade life of the new razor?Gillettes MACH3 Project(c) 2001 Contemporary Engineering Economics30Cost ReductionnShould a company buy equipment to perform an operation now done manually?n
24、Should spend money now in order to save more money later?(c) 2001 Contemporary Engineering Economics31Types of Strategic Engineering Economic Decisions in Service Sectorq Commercial Transportation q Logistics and Distributionq Healthcare Industryq Electronic Markets and Auctionsq Financial Engineeri
25、ngq Retailsq Hospitality and Entertainmentq Customer Service and Maintenance(c) 2001 Contemporary Engineering Economics32Fundamental Principles of Engineering EconomicsnPrinciple 1: A nearby dollar is worth more than a distant dollar nPrinciple 2: All it counts is the differences among alternatives
26、nPrinciple 3: Marginal revenue must exceed marginal cost nPrinciple 4: Additional risk is not taken without the expected additional return (c) 2001 Contemporary Engineering Economics33Principle 1: A nearby dollar is worth more than a distant dollar Today6-month later(c) 2001 Contemporary Engineering
27、 Economics34Principle 2: All it counts is the differences among alternativesOptionMonthly Fuel CostMonthly MaintenanceCash outlay at signingMonthly paymentSalvage Value at end of year 3Buy$960$550$6,500$350$9,000Lease$960$550$2,400$5500Irrelevant items in decision making(c) 2001 Contemporary Enginee
28、ring Economics35Principle 3: Marginal revenue must exceed marginal costManufacturing costSales revenueMarginal revenueMarginal cost1 unit1 unit(c) 2001 Contemporary Engineering Economics36Principle 4: Additional risk is not taken without the expected additional returnInvestment ClassPotential RiskEx
29、pected ReturnSavings account (cash)Low/None1.5%Bond (debt)Moderate4.8%Stock (equity)High11.5%(c) 2001 Contemporary Engineering Economics37SummarynThe term engineering economic decision refers to all investment decisions relating to engineering projects.nThe five main types of engineering economic decisions are (1) service improvement, (2) equipment and process selection, (3) equipment replacement, (4) new product and product expansion, and (5) cost reduction.nThe factors of time and uncertainty are the defining aspects of any investment project.
