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IE 305 Engineering Economic Analysis

Fall 2014

Course Description
Engineering Economic Analysis. (3-0) Cr. 3. Economic analysis of engineering
decisions under uncertainty. Financial engineering basics including time value of
money, cash flow estimation, and asset evaluation. Comparison of project alternatives
accounting for taxation, depreciation, inflation, and risk.

Prerequisite
Math 166

Instructor
Name: Dr. Guiping Hu
Email: gphu@iastate.edu
Phone: 515-294-8638
Office: 3014 Black Engineering
Office Hours: MW 12:00-1:00am or by appointment

Teaching Assistants
Office: 0022 Black Engineering
Dan Hu <danhu@iastate.edu>, office hours: Friday, 2:10 4: 10pm.
Heidi Laabs <hlaabs@iastate.edu>, office hours: Tuesday, 9-11am.
Kellie McGrath <kmcgrath@iastate.edu>, office hours: MW, 9-10am.

Textbook
Contemporary Engineering Economics 5
th
Edition, by Chan Park, Pearson Prentice
Hall, 2010. ISBN: 0-13-611848-8

Course Objectives
Upon successfully completing this course, students will:
1. Understand the role of engineers in business.
2. Be able to apply the principle of the time value of money in business and
personal economic decisions.
3. Be able to compare alternative projects on the basis of equivalence methods and
rate of return analysis.
4. Be able to develop after-tax cash flows for a project.
5. Know how to account for risk and uncertainty in economic decision-making.

Topics Covered
Rational decision-making process, time value of money, equivalence calculations,
inflation, present-worth analysis, annual equivalence analysis, rate of return analysis,
accounting for depreciation and income taxes, project cash flow development,
sensitivity, break-even and scenario analysis, probabilistic risk analysis.
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Grading
Grading is straight scale (scores will be rounded to the nearest whole number)
A 92.5+
A- 90-92.49
B+ 87-89.49
B 83-86.49
B- 80-82.49
C+ 77-79.49
C 73-76.49
C- 70-72.49
D+ 67-69.49
D 63--66.49
D- 60-62.49
F Below 59.49
Components of the course grade are weighted as follows:
10% Quizzes
10% Homework
20% Night exam 1
20% Night exam 2
15% Course Project
25% Final exam
100% Total

Exams: There will be 3 exams.
First night exam: Oct. 1, 8:15pm 10:15pm
Second night exam: Nov. 5, 8:15pm 10:15pm
Final exam: time and location TBD

Homework: Homework (one single pdf) must be submitted electronically to Blackboard.
No other forms of submission will be accepted. No late homework will be accepted.
Homework is due midnight of the due date. Homework assignments are posted in the
Assignment directory of Blackboard course page.

Class Project: There will be one group project. Details will be announced in due
course.




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Course Structure: The course is divided into 3 parts with 3 exams.

Part 1: Chapters 3 thru 7
Time Value of Money
Effective Interest
Payback (Simple and Discounted)
Evaluation of Alternatives
Net Present Value, Net Future Value, Annual Equivalent Worth
Internal Rate of Return

Part 2: Chapters 8 thru 12
Manufactured Costing
Depreciation
Corporate Taxation
Inflation
Cash Flow Analysis
Evaluation of Mutually Exclusive Alternatives
Risk Analysis

Part 3: Chapters 2, Stocks, 13, and Mortgages
Financial Statement Analysis
Stocks (additional to book)
Stock Options
Mortgages (additional to book)


Contribution of Course to Meeting the Professional Component
Students will learn the key concepts of engineering economic analysis, and how to
apply these concepts in identifying, formulating, and solving economic decision
problems that are relevant to manufacturing and service enterprises. Students will also
learn the quantitative and analytical techniques typically used in the problem solving
processes. Also, students will gain team project experience in realistic industry-
motivated case study projects. 3 credits of engineering topics.


Relationship of Course to Program Outcomes
An ability to identify, formulate and solve engineering problems.
The broad education necessary to understand the impact of engineering solutions in
a global, economic, environmental, and societal context.
An ability to use the techniques, skills and modern engineering tools necessary for
engineering practice.
Be able to integrate the engineering and business processes of an organization.
Be able to provide leadership in multi-functional teams.


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Academic Honesty Statement
The IMSE Department has an expectation that all students will be honest in their
actions and communications. Individuals suspected of committing academic
dishonesty will be directed to the Dean of Students Office as per University policy. For
more information regarding Academic Misconduct see
http://www.dso.iastate.edu/ja/academic/misconduct.html

Professionalism Statement
The IMSE Department has an expectation that all students will behave in a professional
manner during all interactions with fellow students, faculty, and staff. Treating others
with respect and having constructive communications are examples of being
professional.

Student Disabilities or Special Accommodations
Please address any special needs or special accommodations with the instructor at the
beginning of the semester or as soon as you become aware of your needs. Those
seeking accommodations based on disabilities should obtain a Student Academic
Accommodation Request (SAAR) form from the Disability Resources (DR) office (515-
294-6624). DR is located on the main floor of the Student Services Building, Room
1076.