Capital University of Sciences and Technology, Islamabad

Department of Electrical Engineering

Course Title:

ECO4503: Engineering Economics

Pre-requisite(s):

None

Credit Hours:

Instructor:

Mr. Nosherwan Khan

Recommended Book(s):

Engineering Economics, by R. Panneerselvam,

New Delhi-110001 2012

Reference Book(s):

Engineering Economy By William G, Sullivan, James A. Bontadelli,

and Elin M. Wicks

Course Objectives
This course gives an overview of the economics methods employed in effective engineering
decisions as related to the designing, planning and implementation of successful projects. It
emphasizes the practical benefits of the applications of such tools as Time Value of Money
calculations, Depreciation, Replacement Analysis, Benefit to Cost Ratios, Break-even Analysis,
and Life Cycle Cost.

Course Learning Outcomes (CLOs):

At the end of this course, the students should be able to:
1

Compare the intelligent decisions of project alternatives during the planning,

implementation phases based on the cost / benefit analysis. (Level: C2)

and

Classify the total cost of a project over its entire life and make more informed
decisions about maintaining/replacement of assets. (Level: C3)

Compare and select the best project among the alternatives keeping in view
its financial feasibility along with impact on environment and society. (Level: C4)

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Course Contents:

Introduction
Economics
Flow in an Economy
Law of Supply and Demand
Concept of Engineering Economics
Types of Efficiency
Definition and Scope of Engineering Economics
Elements of Costs
Other Costs/Revenues
Marginal Cost
Marginal Revenue
Sunk Cost
Opportunity Cost
Break-Even Analysis
Profit/Volume Ratio (P/VRatio)

2.

Elementary economic analysis

Introduction
Examples for Simple Economic Analysis
Material Selection for a Product/Substitution of Raw Material
Design Selection for a Product
Building Material Selection
Process Planning/Process Modification

3.

Interest formulas and their applications

Introduction
Time Value of Money
Interest Formulas
Single-Payment Compound Amount
Single-Payment Present Worth Amount
Equal-Payment Series Compound Amount
Equal-Payment Series Sinking Fund
Equal-Payment Series Present Worth Amount
Equal-Payment Series Capital Recovery Amount
Uniform Gradient Series Annual Equivalent Amount
Effective Interest Rate

1.

4. How Organization generate the funds

Sources of Income
Shares/Owners Equity
o Preferred Share
o Common Share
Own Money
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Bonds
o Zero Coupon Bond
Coupon Bond

5. Concept of Cash Flow and Tools of Evaluating

Concept of Cash Flow in Decision Making
o Types of Cash Flow
o Estimation of Incremental Cash Flow
Tools for Evaluating:
o Pay Back Period
o Rate of Return Analysis
o NPV
o Profitability Index
6. Replacement and maintenance analysis
Types of Maintenance
Types of Replacement Problem
Determination of Economic Life of an Asset
Replacement of Existing Asset with a New Asset
Capital Recovery with Return
Concept of Challenger and Defender
Simple Probabilistic Model for Items Which Fail Completely
7. Depreciation
Introduction
Methods of Depreciation
Straight Line Method of Depreciation
Declining Balance Method of Depreciation
Sum-of-the-Years-Digits Method of Depreciation
Sinking Fund Method of Depreciation
8. Inflation adjusted decisions
Introduction
Procedure to Adjust Inflation
Inflation Adjusted Economic Life of Machine
Economic Life Determination without Inflationary Effect
Economic Life Determination with Inflationary Effect

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Grading Policy:
S. No.
i

Mapping of CLOs

ii
iii
iv
v

Grading
Class
Participation
Assignments
Quizzes
Mid-term Exam
Final Exam
Total

CLOs

% of Total Marks
05

CLO:1

10
15
20
50
100

and PLOs:
CLO:2
CLO:3

PLOs
PLO:1
(Engineering Knowledge)
PLO:2
(Problem Analysis)
PLO:3
(Design and Development of Solutions)
PLO:4
(Investigation)
PLO:5
(Modern Tool Usage)
PLO:6
(The Engineer and Society)
PLO:7
(Environment and Sustainability)
PLO:8
(Ethics)
PLO:9
(Individual and Team Work)
PLO:10
(Communication)
PLO:11
(Project Management)
PLO:12
(Life Long Learning)

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