Engineering economics - 2012
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| Class date(s): | 11 September onwards | ||||
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Selected references
The following printed materials have influenced the course content. In alphabetical order:
| Author(s) | Title | Library link | Google search for ISBN | Amazon link for ISBN |
|---|---|---|---|---|
| Blank and Tarquin | Engineering Economy (7th edition, or earlier) | McMaster | Amazon | |
| Fraser et al. | Engineering Economics in Canada (3rd edition, or earlier) | McMaster | Amazon | |
| Fraser et al. | Global Engineering Economics (4th edition, or earlier) | McMaster | Amazon | |
| Park, Zuo and Pelot | Contemporary Engineering Economics, a Canadian perspective (3rd edition, or earlier) | McMaster | NA | |
| Peters and Timmerhaus | Plant Design and Economics for Chemical Engineers | McMaster | Amazon | |
| Stermole and Stermole | Economic Evaluation and Investment Decision Methods (13th edition, or earlier) | NA | Amazon | |
| Turton et al. | Analysis, Synthesis and Design of Chemical Processes (4th edition, or earlier) | McMaster | Amazon | |
| Woods, Donald | Cost Estimation for the Process Industries (McMaster download, 30 Mb) | NA | NA | NA |
- A spreadsheet of inflation information specific to the process industries. Print this out for the midterm.
- A reading on the Chemical Engineering Plant Cost Index (CEPCI)
Class slides
- The slides for class are in tab 3 of the notes.
- The presentation slides (with solutions filled in) are available now.
11 September 2012
In this class we give an overview of the "Engineering Economics" section of the course. We start by introducing the topic of the time-value of money.
- Slides: We cover slides 1 to 24. Slides 19, 20 and 23 are exercises for you to do on your own.
- Audio and video recording of the class
- Self-learning: here's an interesting PDF explaining time value of money and engineering economic concepts
- Enrichment: I mentioned an article about packed distillation towers in class today.
13 September 2012
We continue considering the time value of money (TVM) and do some class exercises.
- Slides: We cover slides 24 to 29. Slides 30 and 31 will feature in the next tutorial.
- Audio and video recording of the class
14 September 2012
- We wrap up the TVM section with one more example and then continue looking at Measures of Profitability: slides 32 to 42
- Audio and video (bad sound!)
18 September 2012
- We continue with various Measures of Profitability: slides 42 to 48
- Audio and video recording of the class
20 September 2012
- We will wrap up Measures of Profitability (slides 49 to 54); including jumping ahead to slides 88 to 90.
- If you are looking for some more information regarding NPV vs DCFRR, please read this tutorial, or use this Google search to understand the subtleties.
- Audio and video recording of the class
21 September 2012
- We will cover Depreciation, slide 63 to 80.
- Audio and video recording of the class
- Here are the websites used in today's class if you want more information on CRA's rules on depreciation (called Capital Cost Allowance, CCA):
- CCA for individual tax payers
- Assets that you may depreciate as an individual
- List of eligible business expenses to reduce tax
- Basic information on CCA
- Classes of depreciable property
- CRA's guidance on calculating CCA
- The tax form for businesses claiming CCA
- CRA's guidance on business expense vs capital expense
25 September 2012
- We will (re)cover the effect of depreciation and taxes on NPV, slides 78 to 83 and go through the tutorial/assignment 3. We will also discuss the SDL project selection procedure.
- Audio and video recording of the class
- Please see this PDF slide 80 from the course notes. Note the following relationships:
- \( \text{G} = \text{C}+\text{E} \)
- \(\text{H} = \text{A}-\text{B} - \text{G} = \text{Total income} - (\text{Eligible expenses}) - \text{Depreciation}\)
- \(\text{J} = p_\text{tax} \cdot\text{H} = 0.35 \text{H} \)
- \(\text{L = NCFAT} = \text{A} - \text{B} - \text{J} - \text{K} = \text{A} - (\text{B} + \text{K}) - \text{J} = \text{Total income} - (\text{Total expenses}) - \text{Tax paid}\)
- \(\text{L} \) = this is the line we use for our NPV calculation
- \(\text{M} = \displaystyle \frac{\text{L}}{\left(1+i_\text{MARR}\right)^n}\)
- Important note: I've assumed that expenses are entered as positive numbers. This allows me to write, for example, \( \text{H} = \text{A} - \text{B} - \text{G} = \text{Total income} - (\text{Eligible expenses}) - \text{Depreciation}\). If you use negative signs in front of your dollars, which is what the spreadsheet in the course notes does, then adjust these formulas.
27 September 2012
- We will cover sensitivity analysis on an NPV, slides 104 to 115
- Audio and video recording of the class
- The publication by Adams and Barton with NPV for polygeneration.
- An alternative way to visualize sensitivity analysis data shown in class:
28 September 2012
- We will cover slides on capital cost estimation, starting at slide 116.
- A link to the engineering economics sections in Perry's handbook
- Audio and video recording of the class
02 October 2012
- Capital cost estimation review, focusing on the what the bare module (BM) cost is; slides 128 to 137
- Audio and video recording of the class
04 October 2012
- Continuing with capital cost estimation and some examples; slides 138 to 150
- Audio and video recording of the class
05 October 2012
- Continuing with capital cost estimation and some examples; slides 151 to 158
- Audio and video recording of the class
09 October 2012
- Continuing with capital cost estimation and manufacturing cost estimation; slides 159 onwards
- Audio and video recording of the class
11 October 2012
- We wrap up the engineering economics section and review some final examples.
- Audio and video recording of the class
30 October 2012
- Review of the economics midterm solutions
- Audio and video recording of the class