ESC 282 – Engineering
Economy – Fall 2009
Cleveland
State University, Fenn College of Engineering
Objective.
Engineering Economy discusses the behavior of individuals and businesses
with respect to society and government.
It studies the cultural and regulatory environment in which these
entities exist, and explains the motivation and rationale used by these
entities in their decisionmaking processes. Further, Engineering Economy discusses how financial decisions
made in this environment can affect these entities and alter the environment in
which they operate. Students
taking Engineering Economy will understand criteria for decisionmaking beyond
the technical merit of a project, including the financial, legal, ethical, and
social consequences.
Catalog Data. Course
focuses on the coupling of technical analysis and economic feasibility to
determine the best course of action among alternatives competing for scarce
resources in both public and private sector projects. Studies the principles, concepts, and methodology of the
time value of money as applied to governmental, industrial, and personal
economic decisions. Topics include
benefitcost analysis, inflation, depreciation, taxes, tax abatements, risk and
sensitivity analysis, and the comparison of alternatives. Discussion includes the ethical and
social responsibilities of engineers as they apply to project decisions
affecting job creation and loss, personnel placement, and capital expenditure.
Instructor. Dr.
Brian Thomas. 227 SH, (216)
5237251. Email: m.thomas84@csuohio.edu.
Outcomes. The ABET
outcomes for this course are:
(a) Ability
to apply principles of mathematics, science & engineering to problems and
situations;
(b) Ability to
collect and analyze experimental data;
(f) Understanding
of professional and ethical responsibilities, and;
(h) Understanding
of global/social impact of engineering solutions and contemporary issues.
Upon completion of this course the
students should understand and be able to apply the following concepts in their
professional practice and personal lives:
Course Text
(required). Engineering Economy, Fourteenth Edition, by Sullivan, Wicks, and Wuxhoj (ISBN 0136142973).
Email. Please
start the subject line of classrelated email with “ESC282”.
Attendance &
Late Policy. Attendance is not mandatory, but highly
recommended. It is the student’s
responsibility to obtain lecture notes for missed classes. Homework assignments are to be turned at
the beginning of class. Late
assignments will be graded at the instructor’s discretion. Students will not be allowed to take
missed quizzes or exams, except at the discretion of the instructor. If you know of an absence in advance,
inform the instructor as early as possible to make alternate arrangements for
graded work.
Code of Conduct. Students
may collaborate on homework and project assignments; however, the final product
must reflect the efforts of the student(s) whose name appears on the work. Plagiarism will not be accepted. Plagiarism includes, but is not limited
to, copying the text wordforword in answering problems.
Quizzes and exams are strictly individual
efforts. During quizzes and exams,
only test papers, pens and pencils, and approved calculators are allowed on
table tops. Other materials may be
allowed at the instructor’s discretion.
Wireless devices and PDA’s are strictly prohibited.
Class Schedule
(subject to change).
Week 
Chapters 
Topic 
1 
1 
Introduction;
using Excel 
2 
2 
Cost
concepts and design economics 
3 
3 
Cost
estimation and models 
4 
4 
Moneytime
relationships 
5 
4 
Moneytime
relationships 
6 
 
Review, MIDTERM
1 
7 
5 
Applications
of moneytime relationships 
8 
6 
Comparing
alternatives 
9 
7 
Depreciation 
10 
7 
Corporate
income tax 
11 
 
Review, MIDTERM
2 
12 
8 
Price
changes and exchange rates 
13 
9 
Replacement
analysis 
14 
10 
Evaluating
projects with benefit–costratio method 
15 
11 
Breakeven
and sensitivity analysis 


FINAL
EXAM 
Grading. Final
grades will be based on:
Midterm
exams 60%
(30% each).
Final
exam 40%.
Opensource
learing as
appropriate.
Homework and
Quizzes. Homework will be assigned on a regular basis to help you
assess your understanding of the course material and prepare you for the
exams. Submitting homework is
optional, but recommended.
Homework will be scored according to the following scale:
4. Student displays an excellent understanding of the
concept; execution is good; submission is professional and organized.
3. Student displays a good understanding of the concept;
some math errors in the execution.
2. Student displays a partial understanding of the
concept; execution has significant errors and/or is unprofessional in its
presentation.
1. Student does not communicate an understanding of the
concept.
The
instructor may occasionally give quizzes in class. Scores will not count towards your grade, but will let you
assess your understanding of class material.
Opensource
learning. Education is not limited to the classroom. Additional class credit may be received
if you can demonstrate your having done “opensource” learning activities
during the semester, and relate it to course material and the engineering
profession. Such activities
include:
Skills, Knowledge,
and Attitudes Inventory. The following list is provided to let
you assess your understanding of ESC 282 topics.
SKA 
Ch. 
Item 
K 
1 
Seven +1
principles of engineering economy 
S 
N/A 
Using
equations in a speadsheet 
A 
N/A 
Formatting
a spreadsheet for printing 
A 
N/A 
Formatting
a chart for printing 
K 
2 
Cost
terminologies 
A 
2 
Dealing
with sunk costs 
K 
2 
Project
life cycle 
A 
2 
Relationships
between cost, demand 
S 
2 
Finding
maximum profit given cost and revenue functions 
S 
2 
Finding
breakeven point(s) 
S 
3 
Developing
a work breakdown structure 
S 
3 
Using
indices to estimate cost 
S 
3 
Using
parametric models to estimate cost 
A 
3 
Limits of
models and indices 
A 
4 
Future
cash flows not worth as much as present cash flows 
S 
4 
Calculating
compound interest 
K 
4 
Equation
for compound interest 
S 
4 
Drawing
cash flow diagrams 
A 
4 
Equivalence
of present, future values 
S 
4 
Equivalence
 annuities 
S 
4 
Equivalence
 arithmetic gradients 
S 
4 
Equivalence
 geometric gradients 
S 
4 
Equivalence
 deferred annuities 
S 
4 
Using
equations to solve TVM problems 
S 
4 
Using
tables to solve TVM problems 
S 
N/A 
Using your
calculator to solve TVM problems 
S 
N/A 
Using
Excel to solve TVM problems 
S 
4 
Calculating
nominal and effective interest rates 
K 
5 
What is
the MARR? 
S 
5 
Evaluating
projects on PW, AW, FW 
S 
5 
Calculating
the IRR 
S 
5 
Calculating
the ERR 
S 
5 
Calculating
the simple payback period 
S 
5 
Calculating
the compound payback period 
A 
6 
Using
incremental analysis to compare ME alternatives 
S 
6 
Comparing
projects on PW, AW, FW 
S 
6 
Comparing
projects using rateofreturn methods 
S 
6 
Comparing
projects with equal lives 
S 
6 
Comparing
projects with unequal lives  repeatability 
S 
6 
Comparing
projects with unequal lives  cotermination 
S 
6 
Comparing
projects with unequal lives  other methods 
A 
7 
What is
depreciation? 
K 
7 
What is
depreciable property? 
K 
7 
Depreciation
terms and definintions 
S 
7 
Straightline
depreciation 
S 
7 
Unitsofproduction
depreciation 
S 
7 
Decliningbalance
depreciation 
S 
7 
DBSL
depreciation 
S 
7 
MACRS
depreciation definitions 
S 
7 
MACRS 
GDS depreciation 
S 
7 
MACRS 
ADS depreciation 
K 
N/A 
Types of
corporations 
A 
7 
Corporate
taxes 
K 
7 
Types of
taxes 
S 
7 
Calculating
corporate income taxes 
K 
7 
Marginal,
effective tax rates 
S 
7 
Calculating
capital gains 
S 
7 
Calculating
aftertax cash flow for the enterprise 
S 
7 
Calculating
aftertax cash flow for a project 
S 
7 
Evaluating
projects on the basis of ATCF 
K 
8 
Inflation
 terms and concepts 
K 
8 
Using the
CPI as a measure of inflation 
S 
8 
Using
inflation in engineering economy 
S 
8 
Inflation
calculations 
K 
8 
Currency
exchange  terms and concepts 
S 
8 
Currency
exchange calculations 
A 
9 
Economic
reasons for asset replacement 
K 
9 
Replacement
analysis  terms and definitions 
S 
9 
Determining
the economic life of a new asset 
S 
9 
Determining
the economic life of an existing asset 
A 
10 
Public
project perspective 
K 
10 
Public
projects  terms and definitions 
A 
10 
Challenges
with public projects 
S 
10 
BenefitCost
Ratio method 
S 
10 
Incremental
BCR method 
A 
11 
Handling
uncertainty in engineering economy 
S 
11 
Breakeven
analysis 
S 
11 
Sensitivity
analysis 
S 
11 
Spider
plots 
S 
11 
OMLP
analysis 