Engineering Economy
Spring 2007 Tsinghua University, Beijing, China
Department of Industrial Engineering
Who 
When 
Where 
Lecturer: Nan Tu PhD
Office
Phone: 62772426
Email:
nantu@mail.tsinghua.edu.cn
Web:
http://www.drtu.com
TA: Pei
Wang
Email:
peiwang05@mails.tsinghua.edu.cn
Dorm
Phone: 51533637 
Every
Wednesday:
3:20 am
– 4:55 pm 
六教6A209 
Text:
Leland Blank and Anthony
Tarquin, Engineering Economy, McGraw Hill, 5^{th} Edition,
ISBN 0072432349
This course will cover: Chapters 1, 2, 3,
4, 5, 6, 7, 8, 10, 11, 12, 13, 14, 16,17
Course
Objectives:
1 Understanding of the “time value
of money” concept.
2. Ability to apply interest
equations to equivalence calculations.
3. Ability to apply various methods
for economic analysis of alternatives.
4. Basic understanding of
depreciation and ability to estimate corporate taxes for typical
engineering projects.
5. Ability to develop project cash
flows for design alternatives including tax implications and perform
calculations using Excel.
6. Ability to make replacement
decisions.
7. Basic understanding of project
risk and uncertainty using sensitivity and breakeven analyses.
8. Basic understanding of inflation
and its impact on engineering economic decisionmaking.
Topics Covered:
1. Engineering economic decisions,
financial statements and cost concepts.
2. Development of interest formulas
and equivalence calculations.
3. Nominal and effective interest
rates. Personal debt management.
4. Annual equivalent worth analysis,
present worth analysis, capitalized equivalent cost, rate of return
analysis, benefit – cost analysis, replacement analysis, sensitivity
analysis and breakeven analysis.
5. Depreciation methods and
estimation of corporate income taxes.
6. Development of project cash flows
for alternatives and analysis using Excel.
7. Inflation and its impact on
project cash flows.
Grading:

Project.
This project will be assigned at the early part of the semester.
This project will carry a weight of
40%.

Homework assignments.
These will be assigned following the class lecture to be completed at
home. The average of these
will carry a weight of 40%.

One large assignment:
There will be one large assignment
which you will use the theory learned from the class to work on a real
world project and write a summary report. This assignment is 20% of
the total score.
Reports and homework assignment must
be submitted at the scheduled times unless the instructor, at his
discretion, grants permission for an alternative time.
Lecture
Schedule:
Week 
Section:
Date 
Topic 
Lecture Notes 
Reading
Assignment 
Home Work 
1 
03/07/07

Introduction, basic
economic concepts, and introduction to interests rate and factors 
1 
Chapter 1 

2 
03/14/07

Combining Factors 
2 
Chapter 2,3 
Homework 1 
3 
03/21/07

Nominal and Effective Int. Rates 
3 
Chapter 4 

4 
03/28/07 
Present Worth analysis, annual Worth
Analysis 
4 
Chapter 5,6 
Homework 2 
5 
04/04/07 
Guest Lecturer (to be
confirmed) 
5 
Case Discussion 
Project
Assignment 
6 
04/11/07

Rate of Return Analysis 
6 
Chapter 7, 8 
Homework 3 
7 
04/18/07 
Benefit / Cost Ratio Analysis 
7 
Chapter 9 

8 
04/25/07

Replacement Analysis 
8 
Chapter 10, 11 
Large Homework Assigned 
9 
05/02/07

National
Holiday, No Class 



10 
05/09/07 
Guest Lecturer 

Case Discussion 

11 
05/16/07

Advanced Topics /
Discussion on Business Plan writing 
9 

Homework 4 
12 
05/23/07

Selection from Independent Projects
and Break Even Analysis 
10 
Chapter 12, 13 

13 
05/30/07 
Effect of Inflation
Affordability 
11 
Chapter 14 
Large Homework Due 
14 
06/07/07

Depreciation and tax 
12/13 
Chapter 16, 17 

15 
06/14/07 
Project Presentation 



16 
06/21/07

Project Presentation 


PPT and Report Due 06/24/07 
(This is a tentative
schedule) 