Examples of Engineering Economic Analysis.

Engineering economic analysis focuses on costs, revenues, and benefits that occur at different times. For example, when a civil engineer"designs a road, a dam, or a building, the construction costs occur in the near future; the benefits to users begin only when construction is finished, but then the benefits continue for a long time.

In fact nearly everything that engineers design calls for spending money in the design and building stages, and after completion revenues or benefits occur-usually for years.

Thus the economic analysis of costs, benefits, and revenues occurring over time is called engineering economic analysis.

Engineering economic analysis is used to answer many different questions.

· Which engineeringprojects are worthwhile? Has the mining or petroleum engineer shown that the mineral or oil deposit is worth developing?
· Which engineering projects should have a higher priority?  Has the industrial engineer shown which factory improvement projects should be funded with the available dollars?
· How should the engineering project  be designed? Has  the  mechanical or electrical  engineer chosen the most economical motor size? Has the civil or mechanical engineer chosen the best thickness for insulation? Has the aeronautical engineer made the best trade-offs between 1) lighter materials that are expensive to buy but cheaper to fly and 2) heavier materials that are cheap to buy and more expensive to fly? Engineering economic analysis can also be used to answer questions that are personally important.

· How to achieve long-termfinancial goals: How much should you save each month to buy a house, retire,or fund a trip around the world? Is going to graduate school a good investment-Will your additional earnings in later years balance your lost income while in graduate school?

· How to compare different ways to finance purchases: Is it better to finance your car purchase by using the dealer's low interest rate loan or by taking the rebate and borrowing money fromyour bank or credit union?

· How to make short and long-term investment decisions: Is a higher salary better than stock options? Should you buy a 1- or 2-semester parking pass?


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