ETI 2670 - Technical Economic Analysis

Engineering and Building Arts Department

Credit(s): 3
Contact Hours: 47
Effective Term Summer 2005 (350)

Course Description

This course defines the economic evaluation of engineering alternatives and analysis of cost allocation in technical operations. Topics include the time value of money and the economic impact of risk, inflation, depreciation, and capital budgeting with applications related to those areas.

Learning Outcomes and Objectives

  1. The student will understand the economic environment and cost concepts by:
    1. describing the difference between consumer goods and producer goods.
    2. explaining why the elasticity of demand for necessities differs from the elasticity of demand for luxuries.
    3. listing several business situations in which perfect competition is approached.
    4. describing the difference between consumer goods and producer goods.
    5. explaining why the elasticity of demand for necessities differs from the elasticity of demand for luxuries.
    6. listing several business situations in which perfect competition is approached.
    7. defining and illustrating a fixed cost and a variable cost in the context of industrial production.
    8. explaining the law of supply and demand and the law of diminishing returns.
    9. calculating net profit, maximum profit and breakeven points when solving problems.
    10. solving problems involving alternative designs, materials, or methods.
  2. The student will understand interest and money-time relationships by:
    1. describing when interest and profit are considered in financing a company.
    2. describing the difference between simple and compound interest and solving problems using simple and compound interest.
    3. analyzing the factor of equivalence in engineering economic problems.
    4. applying interest formulas relating a uniform series to its present and future worth in assorted problems.
    5. solving interest problems related to deferred annuities, nominal and effective interest rates, compounding, and installment financing.
  3. The student will understand the methods used for making economy studies by:
    1. describing the basic methods for making economy studies to include annual worth, present worth, future worth, internal rate of return, external rate of return, and explicit reinvestment rate of return.
    2. applying the correct formulas and solving assorted problems related to these basic methods.
    3. comparing the different economic study methods.
    4. discussing and applying decision criteria using case studies.
  4. The student will understand risk, uncertainty, sensitivity, and multiple attributes by:
    1. discussing and analyzing the meaning of risk, uncertainty, and sensitivity.
    2. discussing the concept of expected values in making decisions when uncertainty is involved.
    3. solving problems involving risk uncertainty, sensitivity, and multiple attributes.
  5. The student will understand estimating, inflation, and costs by:
    1. defining and discussing the sources of estimates.
    2. discussing the effects of inflation.
    3. solving application problems related to the effects of inflation.
    4. discussing and describing fixed and increment costs.
    5. solving problems related to capacity factor, load factor, and diversity factors.
    6. describing the effects of sunk cost.
  6. The student will understand depreciation and valuation by:
    1. defining and discussing the concepts of depreciation and value.
    2. describing the types and requirements of depreciation.
    3. solving application problems related to the common methods of depreciation accounting.
    4. applying the sinking fund formula.
  7. The student will understand replacement studies by:
    1. explaining the reasons for using replacement.
    2. discussing the factors to be considered in replacement studies.
    3. solving application problems related to losses due to unamortized values..
    4. determining the most economic life of a new asset.
    5. solving problems related to replacement versus augmentation for economic choices.
    6. describing the effects of salvage value.
  8. The student will understand capital budgeting by:
    1. defining and discussing how capital is acquired and from what sources.
    2. discussing how capital projects are identified and evaluated.
    3. explaining the basic differences between equity and borrowed capital.
    4. discussing and describing the standards for project acceptability.
    5. describing how final project selections are made.
    6. describing the effects of post investment reviews.

Criteria Performance Standard

Upon successful completion of the course the student will, with a minimum of 70% accuracy, demonstrate mastery of each of the above stated objectives through classroom measures developed by individual course instructors.

History of Changes

3 Year Review 2008-certified acceptable for content and format.
C&I Approval: 03/08/2005, BOT Approval: 04/19/2005, Effective Term: Summer 2005 (350)