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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