OP401 - Power Plant Engineering Economics

3 days - 1.9 Continuing Education Units Awarded

The Engineering Economics Seminar is designed to better prepare engineering and management personnel in making decisions regarding the acquisition and retirement of capital goods. The same concepts and methods that are helpful in guiding decisions about investments in capital goods are useful in certain kinds of decisions between alternative financing (for example, ownership versus leasing) and in many personal decisions. Applications to these other areas of decision making also are discussed.

The underlying philosophy regarding comparisons is a continued emphasis on the following two points:

It is prospective differences between alternatives that are relevant in their comparison.

The fundamental question regarding a proposed investment in capital goods is whether the investment is likely to be recovered plus a return commensurate with the risk and with the return obtainable from other opportunities of limited resources. The purpose of calculations involving the time value of money is often the answer to the question.

The Student Text provides useful reference material for future use. The text is Principles of Engineering Economics by Grant/Ireson/Leavenworth. This is the same textbook utilized by the Tennessee Valley Authority for developing their engineering staff of the same subject proposed here. This text will be supported by power plant related handouts and case studies.

The student will also receive a Texas Instrument calculator pre-programmed for time-value-of-money, amortization, cash flows, 24 cash flows for net present value and internal rate of return calculations. Use of this calculator is essential to this Seminar, as it will minimize time spent on calculations.

Seminar OUTLINE

1. Introduction
2. Some Basic Concepts In Engineering Economy
   1. Basic Principles of Economic Choice
   2. Equivalence
   3. Financial Mathematics
3. Judging The Attractiveness Of Proposed Investments
   1. Equivalent Uniform Annual Cash Flow
   2. Present Worth
   3. Internal Rate of Return
   4. Measures Involving Costs
   5. Benefits and Effectiveness
   6. Some Relationships between Accounting and Engineering Economy
   7. Estimating Income Tax Consequences of Certain Decisions
   8. Increment Costs
   9. Economic Sizing
   10. Sunk Costs
   11. Interdependent Decisions
4. Techniques For Evaluating Alternatives
   1. Economy Studies for Retirement and Replacement
   2. Use of the Mathematics of Probability in Economic Studies
5. Economy Studies For Regulated Public Utilities