ENGINEERING ECONOMY

REPORTED BY:
JASMIN VERGANIO
IMPORTANT APPLICATIONS OF
ENGINEERING ECONOMY
The most important uses and function of
Engineering Economy are the following:
1.) Seeking of new objectives for the
applications of engineering.
2.) Discovery of factors limiting the success of
a venture or enterprise.
3.) Analysis of possible investment of capital.
4.) Comparison of alternatives as a basis for
decision.
5.) Determination of bases for decision.
Seeking of New Objectives
 Knowing an objective, the next step is to
determine ways and means to attain such an
objective. Engineering Economy seeks to
discover so-called limiting factors which may
hinder the success of a project.
Investment of Capital
With the exception of a few cases, capital is invested
to earn profit for the owners of the capital.

Engineering Economy enables engineers to consider

all aspects of the investment from both the technical
and financial viewpoints.

Engineering Economy furnishes several patterns of

analysis to determine rate of return, annual costs and
payout periods, which all serve as bases for decision.
Comparison of Alternatives
 Most anything that has to be done can be
accomplished in many ways with satisfactory end
results, but with varying expenditures. Usually the
alternative that will accomplish the objective with
the least expense is the most desirable.
Bases for Decision
 The work of engineers is fundamentally
concerned with future actions on what to do, not
on what has been accomplished. Decisions on
future actions are more valid and their chances
for accuracy are improved when principles of
Engineering Economy are correctly applied.
ENGINEERING ECONOMY TECHNIQUE

1. Economy Analysis
2. Financial Analysis
3. Intangible Analysis
Economy Analysis

Considers all factors affecting the economy of

the project which can be reduced to specific
monetary values.
Financial Analysis

Determines the methods and sources of

financing the project, either through equity
capital or borrowed capital, or a combination
of both.
Intangible Analysis

Determines all aspects of the project which

cannot be reduced to monetary values and
considers the uncertainty and the risk inherent in
the project.
DEFINITION OF TERMS
• Venture- considered as small business.
• Enterprise- a business or company.
• Hinder- to make slow or difficult the progress
• Rate of return- measure of profit as a percentage
of investment.
• Annual costs - yearly cost.
• Payout periods- period of time during which
benefits on an annuity.
• Expenditures- the act or process of expending.
• Monetary values- is value in currency that a person,
business, or the market places on a resource,
product, or service.
• Intangeble- unable to be touched or grasped; not
having physical presence.