ENGG*3240 Engineering Economics

Fall 2018
Section(s): C01
School of Engineering
Credit Weight: 0.50
Version 1.00 - September 05, 2018

1 Course Details
1.1 Calendar Description
This course covers the principles of project evaluation; analysis of capital and operating costs
of engineering alternatives, benefit-cost ratio; break-even studies, evaluations recognizing risk,
replacement and retirement of assets; tax considerations, influence of sources of funds.
Pre-Requisite(s): MATH*1210
Restriction(s): Registration in the Engineering program.

1.2 Course Description

The main goals of the course are:

1. To acquire and independently apply concepts and techniques of economic analysis used
to form engineering decisions.
2. To assess cost implication in engineering design and application.
3. To select a preferred course of action based upon monetary and non-monetary
considerations
4. To assess risks and uncertainty associated with engineering economic decisions.

1.3 Timetable
Lectures:

Tuesday 1:00 - 2:20 PM WMEM

Thursday 1:00 - 2:20 PM WMEM

1.4 Final Exam

Wednesday, December 5, 2018, 2:30 - 4:30 pm, location TBA
2 Instructional Support
2.1 Instructor(s)
Soha Eid Moussa
Email: [email protected]
Telephone: +1-519-824-4120 x56141
Office: THRN 1341
Office Hours: open door policy or by appointment

2.2 Teaching Assistant(s)

Teaching Assistant: Ian Cabral
Email: [email protected]
Office Hours: TBA on Courselink
Teaching Assistant: Sandra Dusolt
Email: [email protected]
Office Hours: TBA on Courselink
Teaching Assistant: Colin Gibson
Email: [email protected]
Office Hours: TBA on Courselink
Teaching Assistant: Claudia Smith
Email: [email protected]
Office Hours: TBA on Courselink
Teaching Assistant: Praveena Thirunathan
Email: [email protected]
Office Hours: TBA on Courselink

3 Learning Resources
Course material, news, announcements, and grades will be regularly posted to the ENGG*3240
Courselink site.  You are responsible for checking the site regularly.

3.1 Required Resource(s)

Custom Supplement for ENGG*3240 (Notes)
This custom document must be purchased and brought to all midterms and the final exam.  It
contains the interest tables as well as the various equations needed to be able to perform
economic analysis of cash flows.
Clickers: clickers will occasionally be used to verify understanding and encourage class
participation, please bring your clicker to class regularly (Equipment)

3.2 Recommended Resource(s)

Niall M. Fraser, Elizabeth M. Jewkes, Mehrdad Pirnia 2016. Engineering Economics: Financial
Decision Making for Engineers, 6th Edition. Pearson Education Canada. (Textbook)

3.3 Additional Resources

 Lecture Information: All the lecture notes will be posted on Courselink (week #1-#12).

Lab Information: N/A

Assignments: Download the assignments, all the solutions will be posted.

Miscellaneous Information: Other information may also be posted on the web page.

3.3 Communication and Email Policy

Please use lectures and office hours as your main opportunity to ask questions about the
course.  Major announcements will be posted to the course Courselink website.  It is your
responsibility to check the course Courselink website regularly. As per University
regulations, all students are required to check their <uoguelph.ca> e-mail account regularly:  e-
mail is the official route of communication between the University and its students.

4 Learning Outcomes
4.1 Course Learning Outcomes
By the end of this course, you should be able to:
1. Apply the concepts of time-value of money, taking into consideration the impact of interest
on investment decisions by comparing between potential candidates and identifying the
better investment
2. Select the appropriate evaluation method for comparing between alternate investment
opportunities by identifying important factors such as life expectancy and measure of
interest (dollar value vs rate of return)
3. Demonstrate understanding that assets having different life expectancies can not be
directly compared through use of common life concepts or by using annual worth
comparisons
4. Evaluate different project/investment opportunities to select the most beneficial by applying
the appropriate evaluation method
5. Determine the rate of return of a project through analysis of cash flows, whether they are
positive or negative, and how frequently they change from positive to negative.
6. Determine the book value of an asset for accounting and tax purposes by applying
knowledge of depreciation
7. Understand basic accounting concepts through identification of elements of a balance
sheet and income statement
8. Determine the after-tax viability of a project through the application of after-tax cash flow
analysis using capital tax factors, capital salvage factors, tax rates, and depreciation rates.
9. Evaluate when an asset should be replaced through the use of replacement analysis both
before and after tax by determining its economic life.
10. Demonstrate ability to calculate asset/project value due to inflation through application of
concepts of real dollars versus actual dollars.
11. Recommend public-sector projects to be implemented by applying benefit cost ratio
analysis
4.2 Engineers Canada - Graduate Attributes (2018)
Successfully completing this course will contribute to the following:
# Outcome Set Name Course Learning
Outcome
1 Knowledge Base 2, 6
1.3 Recall, describe and apply fundamental engineering principles and 2, 6
concepts
2 Problem Analysis 1, 2, 3, 4, 5, 8, 9,
10, 11
2.1 Formulate a problem statement in engineering and non-engineering 2, 3, 4, 5, 8, 9,
terminology 10, 11
2.2 Identify, organize and justify appropriate information, including 1, 2, 3, 4, 5, 8, 9,
assumptions 10, 11
2.3 Construct a conceptual framework and select an appropriate solution 1, 2, 3, 4, 5, 8, 9,
approach 10, 11
2.4 Execute an engineering solution 2, 3, 4, 5, 8, 9,
10, 11
2.5 Critique and appraise solution approach and results 2, 3, 4, 5, 8, 9,
10, 11
11 Economics and Project Management 4, 5, 8, 9, 10, 11
11.3 Estimate economic impact and feasibility of an engineering project or 4, 5, 8, 9, 10, 11
design using techniques such as cost benefit analysis over the life of the
project or design

5 Teaching and Learning Activities

5.1 Lecture Schedule
Learning
Topic
Objectives

Making economic decisions, sea of problems, role of engineering economics

analysis, decision making process, engineering costs, cost estimation methods, 1
estimation of benefits.

Cash flow diagram, computing cash flow, time value of money, interest and
1, 2
equivalence, compound interest formulas: single payment, uniform series,
arithmetic and geometric gradient series, nominal and effective interest rates and
continuous compounding. Assumptions in solving economic problems, economic
rules, application of present worth analysis, Annual cash flow analysis, annual
cash flow calculation. Analysis period.

Equivalent Uniform Annual Cost (EUAC). Equivalent Uniform Annual Benefits

(EUAB). Annual worth analysis Evaluation of Alternatives with: equal lives, 1, 2, 3
common multiple lives, continuous lives, and fixed study period.

Internal rate of return, Minimum attractive rate of return. Present worth versus
Interest Rate. Calculation of internal rate of return. Incremental internal rate of
4
return. Multiple IRRs. External Rate of Return (ERR). Modified Internal Rate of
Return (MIRR). Selection of best alternative by incremental and graphical analysis.

Future worth, minimum attractive rate of return, benefit cost and payback period
4
analysis techniques. Sensitivity and break-even analysis

Concept of depreciation, book value, depreciation methods, depreciation and asset

disposal, depreciation for tax purpose (capital cost allowance factor), and 5
calculation of capital coat allowance factor.

The role of accounting in engineering economy. Divisions within an organization,

Balance sheet and income statement, Assets, liabilities, equity and evaluation of 6
indices (Ratios).

Taxes. Individual and corporate, incremental nature of taxes, combined tax rates.
After tax cash flow analysis, taxable income, after tax present worth and rate of 7
return.

Replacement Analysis. Factors affecting replacement, Replacement analysis

techniques. Concept of challenger and defender. Challenger is different from
defender. Sequence of identical challengers, challenger is not repeated and 6, 7
defender and challenger with unequal lives. Complications in replacement
analysis. After tax replacement analysis.

Inflation in engineering economy. Measurement of Inflation. Relationship

between actual dollar and real dollar. Price Indexes. Inflation and tax 8
calculations. Effect of inflation on MARR and IRR.

Economic analysis in the public sector. Public decision factors. Interest

rates for public projects Benefit-Cost Ratio, conventional and modified B/C 9
and Incremental B/C. Financing duration and politics of investments

Uncertainty in engineering economic analysis. Range of estimated values

for evaluation. Probability and joint probability distributions, expected value, 3
measurement and consideration of risk

 
  

5.2 Other Important Dates

Thursday, 6 September 2018: First class

Monday, 8 October 2018: Thanksgiving holiday

Tuesday, 9 October 2018: Study Break Day

Friday, 2 November 2018: drop date – 40th class

Thursday, 29 November 2018: replaces Study Break Day  (Tuesday Schedule in effect)

Friday, 30 November 2018: last day of class (replaces Thanksgiving, Monday Schedule in effect)

Please refer to the undergraduate calendars for the semester scheduled dates.

6 Assessments
6.1 Assessment Details
Midterm 1 (25%)
Date: Tue, Oct 16, 1:00 PM, WMEM
duration 60 minutes
Midterm 2 (25%)
Date: Thu, Nov 8, 1:00 PM, WMEM
duration 60 minutes
Final Exam (50%)
Date: Wed, Dec 5, 2:30 PM - 4:30 PM, TBA on Webadvisor

7 Course Statements
7.1 Course Grading Policies
Missed Assessments: If you are unable to meet an in-course requirement due to medical,
psychological, or compassionate reasons, please email the course instructor. See the
undergraduate calendar for information on regulations and procedures for Academic
Consideration: http://www.uoguelph.ca/registrar/calendars/undergraduate/current/c08/c08-
ac.shtml

Accommodation of Religious Obligations: If you are unable to meet an in-course requirement

due to religious obligations, please email the course instructor at the start of the semester to
make alternate arrangements. See the undergraduate calendar for information on regulations
and procedures for Academic Accommodation of Religious Obligations:
 http://www.uoguelph.ca/registrar/calendars/undergraduate/current/c08/c08-accomrelig.shtml

Missed midterm tests: If you miss a test due to grounds for granting academic consideration
or religious accommodation, the weight of the missed test will be added to the final exam. There
will be no makeup midterm tests.

Passing grade: In order to pass the course, you must obtain a grade of 50% or higher in the
course.

8 School of Engineering Statements

8.1 Instructor's Role and Responsibility to Students
The instructor’s role is to develop and deliver course material in ways that facilitate learning for
a variety of students. Selected lecture notes will be made available to students on Courselink
but these are not intended to be stand-alone course notes. Some written lecture notes will be
presented only in class. During lectures, the instructor will expand and explain the content of
notes and provide example problems that supplement posted notes. Scheduled classes will be
the principal venue to provide information and feedback for tests and labs.

8.2 Students' Learning Responsibilities

Students are expected to take advantage of the learning opportunities provided during lectures
and lab sessions. Students, especially those having difficulty with the course content, should
also make use of other resources recommended by the instructor. Students who do (or may) fall
behind due to illness, work, or extra-curricular activities are advised to keep the instructor
informed. This will allow the instructor to recommend extra resources in a timely manner and/or
provide consideration if appropriate.

8.3 Lab Safety

Safety is critically important to the School and is the responsibility of all members of the School:
faculty, staff and students. As a student in a lab course you are responsible for taking all
reasonable safety precautions and following the lab safety rules specific to the lab you are
working in. In addition, you are responsible for reporting all safety issues to the laboratory
supervisor, GTA or faculty responsible.

9 University Statements
9.1 Email Communication
As per university regulations, all students are required to check their e-mail account regularly: e-
mail is the official route of communication between the University and its students.

9.2 When You Cannot Meet a Course Requirement

When you find yourself unable to meet an in-course requirement because of illness or
compassionate reasons please advise the course instructor (or designated person, such as a
teaching assistant) in writing, with your name, id#, and e-mail contact. The regulations and
procedures for Academic Consideration are detailed in the Undergraduate Calendar.
9.3 Drop Date
Courses that are one semester long must be dropped by the end of the fortieth class day; two-
semester courses must be dropped by the last day of the add period in the second semester.
The regulations and procedures for Dropping Courses are available in the Undergraduate
Calendar.

9.4 Copies of Out-of-class Assignments

Keep paper and/or other reliable back-up copies of all out-of-class assignments: you may be
asked to resubmit work at any time.

9.5 Accessibility
The University promotes the full participation of students who experience disabilities in their
academic programs. To that end, the provision of academic accommodation is a shared
responsibility between the University and the student.

When accommodations are needed, the student is required to first register with Student
Accessibility Services (SAS). Documentation to substantiate the existence of a disability is
required, however, interim accommodations may be possible while that process is underway.

Accommodations are available for both permanent and temporary disabilities. It should be
noted that common illnesses such as a cold or the flu do not constitute a disability.

Use of the SAS Exam Centre requires students to book their exams at least 7 days in advance,
and not later than the 40th Class Day.

More information: www.uoguelph.ca/sas

9.6 Academic Misconduct

The University of Guelph is committed to upholding the highest standards of academic integrity
and it is the responsibility of all members of the University community – faculty, staff, and
students – to be aware of what constitutes academic misconduct and to do as much as
possible to prevent academic offences from occurring. University of Guelph students have the
responsibility of abiding by the University's policy on academic misconduct regardless of their
location of study; faculty, staff and students have the responsibility of supporting an
environment that discourages misconduct. Students need to remain aware that instructors have
access to and the right to use electronic and other means of detection.

Please note: Whether or not a student intended to commit academic misconduct is not relevant
for a finding of guilt. Hurried or careless submission of assignments does not excuse students
from responsibility for verifying the academic integrity of their work before submitting it.
Students who are in any doubt as to whether an action on their part could be construed as an
academic offence should consult with a faculty member or faculty advisor.

The Academic Misconduct Policy is detailed in the Undergraduate Calendar.

9.7 Recording of Materials

Presentations which are made in relation to course work—including lectures—cannot be
recorded or copied without the permission of the presenter, whether the instructor, a classmate
or guest lecturer. Material recorded with permission is restricted to use for that course unless
further permission is granted.
9.8 Resources
The Academic Calendars are the source of information about the University of Guelph’s
procedures, policies and regulations which apply to undergraduate, graduate and diploma
programs.