8. Metode Depresiasi dan
perhitungan pajak 9. After Tax Cash Flow 10. Analisis Penggantian
7. Analisis Sensitivitas
Tugas-3: Menyusun suatu rencana bisnis/usaha beberapa tahun kedepan, dan dapat mengantisipasi segala kemungkinan agar rencana usaha tersebut layak
secara ekonomis.
6. Evaluasi Investasi
5. Bunga Nominal. Efektif. MARR
4.Bunga majemuk dalam ekivalensi
Tugas-1: Menyusun beberapa skema pinjaman dengan tingkat suku bunga tertentu Tugas-2: Menganalisis rencana investasi dengan
metode NPV; BCR; PBP;IRR.
The Role of Engineers in Business
Create & Design
•
Engineering Projects
Evaluate
•
Expected
Proftability
•
Timing of
Cash Flows
Analyze
•
Production Methods
•
Engineering Safety
•
Environmental Impacts
•
Market Assessment
Evaluate
•
Impact on
Financial
Statements
Why Engineering Economy is
Important to Engineers
Engineers design and create
Designing involves economic decisions
Engineers must be able to incorporate
economic analysis into their creative eforts
Often engineers must select and implement
from multiple alternatives
Understanding and applying time value of
money, economic equivalence, and cost
estimation are vital for engineers
ENGINEERING ECONOMY
Involves : Formulating,
estimating, and evaluating the
economic outcomes of
alternatives designed to
accomplish a defned purpose.
Role of engineering economy in
decision making
·
Assist people in making decisions
·
Time frame is the future
·
Best estimates of what is expected to occur
o
Cash flows
o
Time of occurrence
o
Interest rates
o
Observed value in the future will differ form the estimate
made now
·
Sensitivity analysis
o
Performed during the engineering economic study to
ENGINEERING ECONOMY
involves the
systematic evaluation of the economic
merits of proposed solutions to
engineering problems.
To be economically acceptable
(
afordable
),
solutions to engineering
problems
must demotrate a positive
long-
Engineering economy is the
dollars-and-cents side of the decisions that
engineers make or recommend a frm
to be proftable in highly competitive
marketplace
Trade ofs among diferent types of
costs and the performance provided by
the proposed design or problem
Engineering Economic Decisions
Profit! Then continue
at the next stage…
Manufacturing
Needed e.g. in the following (connected) areas:
Accounting vs. Engineering Economy
Present
Future
Past
Engineering Economy
Accounting
What Makes Engineering Economic
Decisions Difficult?
Predicting the Future
Estimating the
required investments
Estimating product
manufacturing costs
Forecasting the
demand for a brand
new product
Estimating a “good”
Key Factors in Selecting Good
Engineering Economic Decisions
Objectives, available resources, time and
uncertainty
are the key defning aspects of all engineering
economic
Types of Strategic Engineering Economic
Decisions in the Manufacturing
Sector
Service Improvement *
Equipment and Process Selection *
Equipment Replacement *
New Product and Product Expansion
*
Example :
Healthcare Service
Improvement
1 Traditional Plan
:
Patients visit the service
providers
2 New Strategy
: Service
providers visit the
patients
Which one of the two plans
is more economical? The
answer typically depends on
the type of patients and the
services ofered. Examples?
patients
service providers
1
Service Improvement
Example 2:
Equipment and Process Selection
How do you choose between using
alternative materials for an auto
body panel?
The choice of material will dictate
Example 3:
Equipment Replacement Problem
Key question:
When is the right time
to replace an old
Equipment Replacement Problem
Now is the time to
replace the old
machine?
If not, when is the
Example 4:
New Product and Product Expansion
Shall we build or
acquire a new facility
to meet the increased
(increasing
forecasted) demand?
Is it worth spending
Example 5: Cost Reduction
Should a company buy
new equipment to perform
an operation that is now
done manually?
Should we spend money
now, in order to save more
money later?
Further Areas of Strategic
Engineering Economic Decisions in
the Service Sector
Commercial Transportation
Logistics and Distribution
Healthcare Industry
Electronic Markets and Auctions
Financial Engineering and Banking
Retail
Hospitality and Entertainment
PRINCIPLES OF ENGINEERING
ECONOMY *
1. Develop the Alternatives;
2. Focus on the Diferences;
3. Use a Consistent Viewpoint;
4. Use a Common Unit of Measure;
5. Consider All Relevant Criteria;
DEVELOP THE ALTERNATIVES
The fnal choice
(decision) is among
alternatives. The
alternatives need to be
identifed and then
defned for subsequent
analysis.
FOCUS ON THE DIFFERENCES
Only the diferences in expected
future outcomes among the
alternatives are relevant to their
comparison and should be
considered in the decision.
Principle 2
Only the cost (resource) difference
among alternatives counts
Option
Monthly
Fuel Cost
Monthly
Maintenance
Cash paid at
signing
(cash outlay )
Monthly
payment
Salvage
Value at end
of year 3
Buy
$960
$550
$6,500
$350
$9,000
Lease
$960
$550
$2,400
$550
0
USE A CONSISTENT VIEWPOINT
The prospective outcomes of the
alternatives, economic and other,
should be consistently developed
from a defned viewpoint
(perspective).
USE A COMMON UNIT OF MEASURE
Using a common unit of
measurement to enumerate as
many of the prospective outcomes
as possible will make easier the
analysis and comparison of
alternatives.
CONSIDER ALL RELEVANT CRITERIA
Selection of a preferred alternative
(decision making) requires the use
of a criterion (or several criteria).
The decision process should
consider the outcomes enumerated
in the monetary unit.
MAKE UNCERTAINTY EXPLICIT
Uncertainty is inherent in
projecting (or estimating) the
future outcomes of the alternatives
and should be recognized in their
analysis and comparison.
REVISIT YOUR DECISIONS
Improved decision making results
from an adaptive process; to the
extent practicable, the initial
projected outcomes of the selected
alternative should be subsequently
compared with actual results
achieved.
The Others Principles of
Engineering Economics
1.
An instant dollar is worth more than a
distant dollar… $
2.
Marginal revenue must exceed
marginal cost, in order to carry out a
proftable increase of operations
3.
Additional risk is not taken without an
1
2
Marginal (unit) revenue has to exceed marginal
cost, in order to increase production
Manufacturing cost
Sales revenue
Marginal
revenue
Marginal
cost
1 unit
3
Additional risk is not taken without a
suitable expected additional return
Investment Class
Potential
Risk
Expected
Return
Savings account
(cash)
Lowest
1.5%
Bond (debt)
Moderate
4.8%
ENGINEERING ECONOMIC ANALYSIS
PROCEDURE
1. Problem recognition, formulation, and
evaluation.
2. Development of the feasible alternatives.
3. Development of the cash fows for each
alternative.
4. Selection of a criterion ( or criteria).
5. Analysis and comparison of the
alternatives.
Rational Decision-Making Process
Recognize the decision
problem
Collect all needed
(relevant) information
Identify the set of feasible
decision alternatives
Defne the key objectives
and constraints
Select the best possible
A Simple Illustrative Example: Car to
Lease – Toyota or Honda?
Recognize the
decision problem
Collect all needed
(relevant) information
Identify the set of
feasible decision
alternatives
Defne the key
objectives
and constraints
Need to lease a car
Gather technical and
fnancial data
Select cars to consider
Wanted: small cash outlay,
safety, good performance,
aesthetics,…
Choice between Toyota
and Honda (or others)
Conclusion
An engineering economy study is
accomplished using a structured
procedure and mathematical
modeling techniques. The
economic results are then used in
a decision situation that involves
two or more alternatives and
The term
engineering economic decision
refers to any investment or other decision
related to an engineering project
The fve 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
Instructor : Mumu Natapriatna
Time : Wed,Thu, 08:30
to 12:30 pm
Location :
Telp. No. : 022 7311908
Mobile phone No.: 0812
2023600
Email: mumunata@gmail.c
om
Ofce hours:
IEG2H2-Engineering Economy
Even Semester, 2015
Syllabus
Course Description:
The purpose for this course is to introduce the economic justifcation and decision making of engineering projects, programs, and organizational asset management. This course provide an introduction to discounted cash-fow analysis and its application to practical problems using spreadsheets, an understanding of how to structure practical decision problems and how to model them analytically as well as the role of, and the necessity for, engineering management of private and public organizations.
Required Text：
•William G. Sullivan, Elin M. Wicks, & James T. Luxhoj, “Engineering Economy,” 12th Ed., Pearson, 2003, ISBN 0-13-039555-2
•Newnan, Donald G., “Engineering Economic Analysis”, Engineering Press,Inc., 1992, California, USA Other References：
•Grant, Ireson, Levenworth, ” Dasar-Dasar Ekonomi Teknik”, PT Rineka Cipta, 2001, Jakarta
•Thuesen, G.J. & Fabrycky, W.J., ” Engineering Economy”, 9th Edition, Prentice Hall, Inc., 2001, New Jersey, USA
•DeGarmo, Sullivan, Bontadelli, Wicks, ”Engineering Economy”, Tenth Edition, Prentice Hall, Inc., 1997, New Jersey, USA
•Steiner, H.M., ”Engineering Economy Principles”, Mc. Graw Hills International, 1996, Singapore •Grant, Ireson, Leavenworth, “Principles of Engineering Economy”, John Wiley&Sons, 1990, Singapore Tools:
An ability to set up and manipulate simple spreadsheets in Excel is expected. The use of the HP-12C or T I fnancial calculator may be recommended.
Grade:
The policy for the student fnal grade will be based on: •> = 85 : A
•70 – 84,99 : B • 55 – 69,99 : C • 40 – 54,99 : D •< 40 : E
Assessment: •Homework
Homework will be assigned about every week in the form of a problem set. For each problem set, 50% of the points will be awarded for completeness (i.e., a serious attempt at all problems), 50% will be allocated to accuracy in the selected problems. Homework is due at the beginning of the class in Room .... on its due date. Will be collected in class, graded, and returned. Late homework receives 1/2 credit. The basis for grading is efort – full credit for most incorrect answers.
•Exams
There will be a midterm exam in the 8th week in class. The fnal exam will be given after the 16th week. Mid-term and Final exam will be open book and notes in class exam. You are expected to take the midMid-term and fnal exam on the dates given. There are no makeup exams! If you have a justifed scheduling confict, you will have to make an arrangement with me one weeks before the exam. Any requests made after that day (other than documented emergencies) may or may not be granted.
•Class Participation
Your presence and participation in class are essential for gaining mastery of the material. At frst sight it might seem to you that the concepts in this course are easy and might be quickly “crammed” before an exam. Experience shows that this frst impression is more often than not incorrect, and in this course we therefore require your attendance and participation. From time to time there may be a mini-quiz in class. The results will enter into your class participation grade. Cellar phone is not allowed during the class. Please turn of your cellar phone before you enter the classroom. We will do 360 degree evaluation in each class.
•Project
Week
Date
Content
Reading
Assignment
1
Introduction to Engineering Economy
WGS, Ch.1
2
•
Cost concept
•
Money-time relationship (Time Value
Of Money)
WGS, Ch.2,3
3
Economic Equivalence
WGS, Ch. 3
4
Present Worth Method/analysis
WGS, Ch. 4, 5
5
Annual Worth analysis; Quiz
WGS, Ch. 4, 5
6
RoR Analysis
WGS, Ch.4,5
7
BCR Analysis; Quiz
WGS,Ch.11
8
Midterm Examination
9
PP and other analysis
WGS, Ch.4,5
10
Sensitivity Analysis
Newnan. Ch.9
11
Depreciation and Income Taxes; Quiz
WGS, Ch.6
12
After Tax Cash fow
Newnan,Ch.10,1
1
13
Replacement Analysis; Quiz
WGS,Ch.9;
Newnan, Ch.12
14
Project Presentation (1)
Case #1: Buy, Rent or Repair?
•
You wreck your car! And you absolutely need one to get around.
•
A wholesaler offers $2,000 for the wrecked car, and $4,500 if it is
repaired. The car’s standing mileage is 58,000 miles.
•
Your insurance company offers $1,000 to cover the cost of the
accident.
•
To repair the car costs $2,000.
•
A newer second–hand car costs $10,000 with a standing mileage
of 28,000 miles.
No panic!
Case #2
Six college students are making plans for spring break. They are
considering traveling 1200 miles to Florida by bus, train, plane, rental
cars, or rental van. Due to bus and train schedules, they limited their
options to plane, two rental cars, or a rental van.
The final data used in their analysis of transportation options are as
follows: round-trip airfare per person ($300); daily rental rate for each
car, all charges except fuel ($50); rental car gas mileage (20
miles/gallon); drop charge for each car ($150); daily rental rate for a
van, all charges except fuel ($80); rental van gas mileage (12
miles/gallon); drop charge for the van ($225); cost to travel to or from
the airport at the spring break destination ($50 per cab, two cabs
Case #3
•
A firm is considering three investment
proposals (A,B, & C). A requires $1M
investment, B requires $2.5M, and C requires
$3M. The firm has $4.5M to invest. C is
