Difference between revisions of "Engineering economics - 2012"

Revision as of 20:24, 25 September 2012

Class date(s):

11 September onwards

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	Google	Amazon
Fraser et al.	Engineering Economics in Canada (3rd edition, or earlier)	McMaster	Google	Amazon
Fraser et al.	Global Engineering Economics (4th edition, or earlier)	McMaster	Google	Amazon
Park, Zuo and Pelot	Contemporary Engineering Economics, a Canadian perspective (3rd edition, or earlier)	McMaster	Google	NA
Stermole and Stermole	Economic Evaluation and Investment Decision Methods (13th edition, or earlier)	NA	Google	Amazon
Turton et al.	Analysis, Synthesis and Design of Chemical Processes (4th edition, or earlier)	McMaster	Google	Amazon

The slides are in tab 3 of the notes.

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.

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

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!)

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

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.
Please see this PDF slide 80 from the course notes. Note the following relationships:
- \( \text{G} = \text{C}+\text{E} \)
- \( \text{H} = (\text{A} - \text{B}) - \text{G} \)
- \(\text{H} = (\text{A}-\text{B}) - \text{G}\)
- \(\text{J} = p_\text{tax} \cdot\text{H} = 0.35 \text{H} \)
- \(\text{L = NCFAT} = \text{A} - \text{B} - \text{J} - \text{K} = \text{A} - (\text{B} + \text{K}) - \text{J} = \text{Total income} - (\text{Total expenses}) - \text{Tax paid}\)
- \(\text{L} \) = 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, \( \text{H} = (\text{A} - \text{B}) - \text{G} \) = Income - Eligible expenses - Depreciation. If you use negative signs in front of your dollars, then adjust the above formula.

@@ Line 133: / Line 133: @@
 === 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.
-* Please see [[Media:NPV-calculation-depreciation-tax.pdf | this PDF slide 80]] from the course notes. Note the following relationships.
+* Please see [[Media:NPV-calculation-depreciation-tax.pdf | this PDF slide 80]] from the course notes. Note the following relationships:
 ** \( \text{G} = \text{C}+\text{E} \)
 ** \( \text{H} = (\text{A} - \text{B}) - \text{G} \)