Engineering Economy

Paper Summary:

This paper defines engineering economy and explains how it is used to evaluate projects relating to their costs and their future value. The paper explains how engineering economy deals with how much a project will cost and what the future benefits of that project will be. This leads into a discussion of "the time value of money", one of the most important concepts in engineering economy. Finally, the paper explains several of the basic concepts of engineering economy and how these concepts can be applied to a company's financial management practices.

From the Paper:

"When we are faced with an engineering project, in general, there are two main things to consider. One of them is how much the project costs, the second one is how much benefit the project will bring. The problem with the project benefit is that, most often, these are future benefits, while the costs are in the present. How can we compare future benefits with present costs? The answer is rather simple: by calculating the future benefits in terms of present benefits. Hence, it is now the proper time to introduce the concept of the time value of money, perhaps the most important concept in engineering economy."

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