Cash Flow,Capital Equivalence,Evaluation Indicators,Equipment Renewal, Value Engineering
What you'll learn
Comparison and Optimization: Select the most economically optimal solution from feasible alternatives.
Value Assessment: Quantify the profitability and investment value of a project.
Risk Management: Identify and address future uncertainties.
Cultivating Mindset: Develop the ability to incorporate economic analysis into technical decision-making.
Requirements
A foundational understanding of basic mathematics and the engineering project lifecycle is essential, though motivated beginners can readily acquire these concepts during the course.
Description
（This course is delivered in Chinese with English slides and subtitles. ）This comprehensive course, Engineering Economics, provides an in-depth exploration of the fundamental principles and analytical methods essential for making sound economic decisions in engineering and technical project management. Taught by Professor Xiaofeng Wang from Guilin University of Technology, the course systematically covers key topics such as the time value of money, cash flow analysis, project economic evaluation, risk and uncertainty analysis, equipment replacement economics, and value engineering.The course aims to cultivate students' ability to integrate engineering and economic thinking, master scientific methods of investment decision-making and economic evaluation tools, and develop the competence to independently analyze, compare, and optimize the economic performance of engineering projects. It lays a solid foundation for future careers in engineering management, project investment, construction decision-making, and enterprise operations.Module 1: Cash Flow and Its CalculationThe foundation of the course begins with an understanding of cash flow. Students will learn to identify and calculate all components of a project's cash flow, including initial investment, operating revenue, and various costs such as business tax and operating costs. A significant portion is dedicated to the concepts of depreciation and amortization, covering multiple calculation methods like the Straight-Line and Accelerated Depreciation methods (including a detailed discussion on the Double Declining Balance Method). The module also explores the treatment of loan interest during construction and culminates in calculating the crucial metric of Net Cash Flow, including an analysis of how depreciation impacts it.Module 2: Time Value of Money and Equivalence CalculationsThis module introduces the critical concept that money has a time-dependent value. It starts with the fundamentals of interest and interest rates, distinguishing between nominal and effective rates. Students then master the techniques of cash flow equivalence, learning to convert between present value (P), future value (F), and annual worth (A) using compound interest factors. The module covers complex scenarios involving arithmetic and geometric gradient series and applies these concepts to practical financial problems, such as various mortgage loan structures (equal principal/interest, equal principal), loan prepayment strategies, and the use of spreadsheet functions for compound interest calculations.Module 3: Methods and Indicators for Economic EvaluationHere, students are introduced to the key metrics used to judge a project's economic worth. The course covers both static indicators, like Return on Investment (ROI) and Static Payback Period, and more robust dynamic indicators. The latter includes Dynamic Payback Period, Net Present Value (NPV), Net Annual Value (NAV), and the Internal Rate of Return (IRR). The calculation principles, decision rules, advantages, and limitations of each indicator are thoroughly examined. The module also addresses debt-service coverage ratios and concludes with an overview of financial sustainability evaluation, providing a holistic view of project assessment.Module 4: Comparison and Selection among AlternativesEngineers often must choose between multiple viable solutions. This module focuses on systematic methods for comparing mutually exclusive and independent alternatives. The core principle taught is the "Incremental Method," applied through Incremental NPV, Incremental Payback Period, and Incremental IRR. Techniques for comparing projects with unequal service lives, such as the Annual Worth method and the Least Common Multiple method for Present Worth, are also covered. Finally, methods for ranking and selecting from a set of independent projects or a mixed set of alternatives are discussed.Module 5: Risk and Uncertainty AnalysisAcknowledging that project forecasts are inherently uncertain, this module equips students with tools to analyze and manage risk. It begins with Break-Even Analysis, both linear and nonlinear, and discusses its application and limitations. Sensitivity Analysis is introduced, teaching students to calculate sensitivity coefficients and represent results via tables and graphs, including multi-factor scenarios. The module then progresses to Probability Analysis, using discrete variables and cumulative probability to describe economic outcomes. Advanced topics include an introduction to Monte Carlo simulation and risk-based decision-making frameworks, including the use of Decision Trees for multistage decisions.Module 6: Economic Analysis of Equipment ReplacementThis applied module focuses on the economics of physical assets. It starts with the concepts of equipment deterioration, its measurement, and compensation strategies like major overhauls. The critical concept of an asset's "economic life" is explored in detail, with methods provided for calculating both static and dynamic economic life. The principles for deciding when to replace equipment, including examples of technological obsolescence, are outlined. The module concludes with an economic analysis of equipment leasing, comparing the cost of leasing versus buying based on total and partial cash flow analyses.Module 7: Fundamentals and Methods of Value EngineeringThe final module shifts focus to maximizing value through design and function analysis. It covers the origin, definition, and standard analytical procedure of Value Engineering (VE). Students learn how to select analysis objects using techniques like ABC Analysis and the Cost-Worth method. Various functional analysis methods are taught, including the 0-1 and 0-4 Forced-Choice Scoring Methods and the Tanaka Method, to define, classify, and measure product functions. The ultimate goal is to identify opportunities for alternative innovation that improve a product's value without compromising its essential functions.In summary, this course offers a rigorous and practical education in the economic aspects of engineering. By its conclusion, students will be proficient in applying a wide array of quantitative and qualitative techniques to ensure that engineering projects are not only technically feasible but also economically sound and financially sustainable.
Who this course is for
The primary audience for engineering economics includes engineers, project managers, corporate decision-makers, financial analysts, and government planners—essentially, anyone who needs to evaluate and select technical solutions from an economic perspective is a target learner.

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