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4.8 Engineering Economics

Economics for application to engineering projects.

    4.8.1 Prepare detailed cost estimates of capital and annual operating costs, maintenance and repair, and replacement costs for a project or component of a project, such as equipment, materials, assembly, inspection, modification, quality assurance, etc.
      4.8.2 Calculate the return on investment, present worth and/or annual cost and benefit of a project having initial capital and annual operation, maintenance, repair, salvage value and replacement costs using appropriate interest, discount, and projected inflation rates.
        4.8.3 Identify and quantify the economic risks associated with a project or product, including how warranty costs are considered for a product.
          4.8.4 Compare design alternatives with varying cost profiles on a present worth or annual cost basis.
            4.8.5 Interact with managers and other professionals in providing project economic information and opinions of project costs in financial analysis and financing process.
            Knowledge Areas

              4.8.6 Time value of money
                4.8.7 Cost, including incremental, average, sunk and estimating
                  4.8.8 Economic analyses
                    4.8.9 Depreciation and taxes
                      4.8.10 Discounted cash flows (PW, EAC, FW, IRR, amortization)
                        4.8.11 Types and breakdown of costs (e.g., fixed, variable, direct and indirect labor)
                          4.8.12 Accounting (financial statements and overhead cost allocation)
                            4.8.13 Capital budgeting
                              4.8.14 Risk identification
                                4.8.15 Cost-benefit analysis
                                  4.8.16 Profit and loss
                                    4.8.17 Supply/demand
                                      4.8.18 Net income statement, cash flow statement, balance sheet