Difference between revisions of "Engineering economics - 2012"
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Revision as of 18:37, 4 October 2012
| 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.
Class slides
The slides are in tab 3 of the notes.
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 155