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EGR 312 - 1 1
Engineering Economy
Instructor: Dr. Laura Moody
EGC 201 G
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Welcome!
• Your syllabus tells you– Website– Learning objectives– Grading– Quizzes– Tests– Project– Disability statement
• A few ground rules– Respect– Cell phones– Attendance– Honor Code– Focus
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Think about it …
• What factors would influence the following decisions?– Buying a new car (whether or not to, what
kind, from where, etc.)– Renting –vs- buying a house– Going to graduate school or straight into
the job market upon graduation
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Key Phrase: “Time Value of Money”
• Fundamental concept of Engineering Economy– The change in the amount of money over a given
time period is called the time value of money.
• Money makes money.– When borrowing money, over time more is owed
than amount borrowed.– When lending, over time more is received than the
amount loaned.
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Why is Engineering Economy important?
• Practical everyday questions: – Should you finance your car or pay cash? Finance for
$6995 –vs- pay $4000 in cash. At what interest rate would you have to invest the $4000 so either option is equivalent?
– Buying a new car: should you take 0% financing for the next 4 years, or a $2000 cash rebate?
– Buying or renting a house: should you continue to pay $625 per month in rent or buy a house for $120,000 at an interest rate of 6%?
– What is the economic benefit of going on to graduate school?
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Why is Engineering Economy important?
• As an Engineer– Engineers tend to work on projects. Projects use
capital (money) to improve a process, develop a new product, improve a product , improve the safety of a process, etc…
– Engineers are typically responsible for “writing the project” which determines the cost of the project and the return on investment.
– When doing a project study, Engineers compare and contrast alternative options for accomplishing the goals of a project. These alternative are often compared from an economic standpoint. (e.g., Lease -vs- Buy, Payback period, Rate of Return, Return on Investment.)