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Engineering Economics is involved with Formulation, Estimation, and Evaluation of Economic Outcomes between Possible Alternatives
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Cash flows 0 1 1 million 2
6 million 1 million
time
5 million
T=0
Rs. 21,800 paid back here
t = 1 Yr
Rs. 20,000 now is economically equivalent to Rs. 21,800 one year from now, if the interest rate is equal 9%/year.
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New plant design Alternative 1 Description Cash flows over some time period Analysis using an engineering economy model Evaluated alternative 1
Income, cost estimations Financing strategies Tax laws
Alternatives
Alternative2 Description Cash flows over some time period Analysis using an engineering economy model Evaluated alternative2
Alternatives:
An alternative is stand-alone solution for a given situation.
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1-Problem definition (Principle 1) 2-Development of alternatives (Principle 1) Classical brainstorming Nominal Group Technique (NGT) 3-Development of Prospective outcomes (Principle 2,3 & 4) 4-Selection of decision criterion (Principle 3 & 5) 5-Analysis and comparison of Alternatives (Principle 6) 6-Selection of the preferred alternative 7-Performance monitoring and post-evaluation of results (Principle 7)
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