8. Metode Depresiasi danperhitungan pajak 9. After Tax Cash Flow 10. Analisis Penggantian

7. Analisis Sensitivitas

Tugas-3: Menyusun suatu rencana bisnis/usaha beberapatahun kedepan, dan dapat mengantisipasi segalakemungkinan agar rencana usaha tersebut layak

secara ekonomis.

6. Evaluasi Investasi

5. Bunga Nominal. Efektif. MARR

4.Bunga majemuk dalam ekivalensi

Tugas-1: Menyusun beberapa skema pinjaman dengan tingkat suku bunga tertentu

2. Konsep Biaya 3. Konsep Nilai Uang terhadap Waktu

1. Pengenalan Ekonomi Teknik

Tugas-2: Menganalisis rencana investasi dengan metode NPV; BCR; PBP;IRR.

SAP - EKTEK

IEG2H2-ektek 2

INTRODUCTION

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The Role of Engineers in Business

3

Create & Design

• Engineering Projects

Evaluate

• Expected Profitability• Timing of Cash Flows• Degree ofFinancial Risk

Analyze

• Production Methods• Engineering Safety• Environmental Impacts• Market Assessment

Evaluate

• Impact on Financial Statements• Firm’s Market Value• Stock Price

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Why Engineering Economy is Important to Engineers Engineers design and create Designing involves economic decisions Engineers must be able to incorporate

economic analysis into their creative efforts Often engineers must select and implement

from multiple alternatives Understanding and applying time value of

money, economic equivalence, and cost estimation are vital for engineers

A proper economic analysis for selection and execution is a fundamental task of engineering

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ENGINEERING ECONOMY

Involves : Formulating, estimating, and evaluating the economic outcomes of alternatives designed to accomplish a defined purpose.

It is a tool to assist people in making decisions.

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Role of engineering economy indecision making·Assist people in making decisions·Time frame is the future·Best estimates of what is expected to occur

oCash flowsoTime of occurrenceoInterest ratesoObserved value in the future will differ form the

estimate made now·Sensitivity analysis

oPerformed during the engineering economic study to determine how the decision might change based on varying estimates

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ENGINEERING ECONOMY involves the systematic evaluation of the economic merits of proposed solutions to engineering problems.

To be economically acceptable (affordable), solutions to engineering problems must demotrate a positive balance of long-term benefits over long-term costs, and they must also promote the well being and survival of an organisation.

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Engineering economy is the dollars-and-cents side of the decisions that engineers make or recommend a firm to be profitable in highly competitive marketplace

Trade offs among different types of costs and the performance provided by the proposed design or problem solution.

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Engineering Economic Decisions

9

Financialplanning

Investmentand loan Marketing

Profit! Then continueat the next stage…Manufacturing

Needed e.g. in the following (connected) areas:

Design

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Accounting vs. Engineering Economy

10

PresentFuturePast

Engineering EconomyAccounting

Evaluating past performanceEvaluating and predicting future events

What Makes Engineering Economic Decisions Difficult? Predicting the Future

Estimating the required investments

Estimating product manufacturing costs

Forecasting the demand for a brand new product

Estimating a “good” selling price

Estimating product life and the profitability of continuing production 11

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Key Factors in Selecting Good Engineering Economic Decisions

12

Objectives, available resources, time and uncertainty

are the key defining aspects of all engineering economic

decisions

Types of Strategic Engineering Economic Decisions in the Manufacturing Sector

Service Improvement *Equipment and Process Selection *Equipment Replacement *New Product and Product Expansion

*Cost Reduction *

13IEG2H2-ektek

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Example : Healthcare Service Improvement 1 Traditional Plan:

Patients visit the service providers

2 New Strategy: Service providers visit the patients

Which one of the two plans is more economical? Theanswer typically depends onthe type of patients and theservices offered. Examples?

patientsservice providers

1

2

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Service Improvement How many more jeans would Levi need to sell to

justify the cost of additional robotic tailors?

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Example 2: Equipment and Process Selection

How do you choose between using alternative materials for an auto body panel?

The choice of material will dictate the manufacturing process and the associated manufacturing costs

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Which Material to Choose?

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Example 3: Equipment Replacement Problem Key question:

When is the right time to replace an old machine or equipment?

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Equipment Replacement Problem Now is the time to

replace the old machine?

If not, when is the right time to replace the old equipment?

Example 4: New Product and Product Expansion Shall we build or

acquire a new facility to meet the increased (increasing forecasted) demand?

Is it worth spending money to market a new product?

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Example 5: Cost Reduction

Should a company buy new equipment to perform an operation that is now done manually?

Should we spend money now, in order to save more money later?

The answer obviously depends on a number of factors.

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Further Areas of Strategic Engineering Economic Decisions in the Service Sector Commercial Transportation Logistics and Distribution Healthcare Industry Electronic Markets and Auctions Financial Engineering and Banking Retail Hospitality and Entertainment Customer Service and Maintenance

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PRINCIPLES OF ENGINEERING ECONOMY *

1. Develop the Alternatives;2. Focus on the Differences;3. Use a Consistent Viewpoint;4. Use a Common Unit of Measure;5. Consider All Relevant Criteria;6. Make Uncertainty Explicit;7. Revisit Your Decisions

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DEVELOP THE ALTERNATIVES

The final choice (decision) is among alternatives. The alternatives need to be identified and then defined for subsequent analysis.

Principle 1

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FOCUS ON THE DIFFERENCES

Only the differences in expected future outcomes among the alternatives are relevant to their comparison and should be considered in the decision.

Principle 2

Principle 2 Only the cost (resource) difference

among alternatives counts

Option Monthly Fuel Cost

Monthly Maintenance

Cash paid at signing(cash outlay )

Monthly payment

Salvage Value at end of year 3

Buy $960 $550 $6,500 $350 $9,000

Lease $960 $550 $2,400 $550 0

26

The data shown in the green fields are irrelevant items for decision making, since their financial impact is identical in both cases

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USE A CONSISTENT VIEWPOINT

The prospective outcomes of the alternatives, economic and other, should be consistently developed from a defined viewpoint (perspective).

Principle 3

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USE A COMMON UNIT OF MEASURE

Using a common unit of measurement to enumerate as many of the prospective outcomes as possible will make easier the analysis and comparison of alternatives.

Principle 4

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CONSIDER ALL RELEVANT CRITERIA

Selection of a preferred alternative (decision making) requires the use of a criterion (or several criteria). The decision process should consider the outcomes enumerated in the monetary unit.

Principle 5

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MAKE UNCERTAINTY EXPLICIT

Uncertainty is inherent in projecting (or estimating) the future outcomes of the alternatives and should be recognized in their analysis and comparison.

Principle 6

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REVISIT YOUR DECISIONS

Improved decision making results from an adaptive process; to the extent practicable, the initial projected outcomes of the selected alternative should be subsequently compared with actual results achieved.

Principle 7

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The Others Principles of Engineering Economics

1. An instant dollar is worth more than a distant dollar… $

2. Marginal revenue must exceed marginal cost, in order to carry out a profitable increase of operations

3. Additional risk is not taken without an expected additional return of suitable magnitude $

32

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1 An instant dollar is worth more than a

distant dollar…

33

Today 6 months later

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2Marginal (unit) revenue has to exceed marginal

cost, in order to increase production

34

Manufacturing cost

Sales revenue

Marginal revenue

Marginal cost

1 unit

1 unit

3Additional risk is not taken without

a suitable expected additional return

Investment Class Potential Risk

Expected Return

Savings account (cash)

Lowest 1.5%

Bond (debt) Moderate 4.8%

Stock (equity) Highest 11.5%

35

A simple illustrative example. Note that all investments implysome risk: portfolio management is a key issue in finance

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ENGINEERING ECONOMIC ANALYSIS PROCEDURE

1. Problem recognition, formulation, and evaluation.

2. Development of the feasible alternatives.3. Development of the cash flows for each

alternative.4. Selection of a criterion ( or criteria).5. Analysis and comparison of the

alternatives.6. Selection of the preferred alternative.7. Performance monitoring and post-

evaluation results.

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Steps in an Engineering Economy Study

Rational Decision-Making Process

Recognize the decision problem

Collect all needed (relevant) information

Identify the set of feasible decision alternatives

Define the key objectives

and constraints Select the best possible

and implementable decision alternative

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A Simple Illustrative Example: Car to Lease – Toyota or Honda? Recognize the

decision problem Collect all needed

(relevant) information Identify the set of

feasible decision alternatives

Define the key objectives

and constraints Select the best

possible and implementable decision alternative

Need to lease a car

Gather technical and

financial data Select cars to consider Wanted: small cash outlay,

safety, good performance, aesthetics,…

Choice between Toyota and Honda (or others)

Select a car (i.e., Honda, Toyota or another brand)

39

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Conclusion

An engineering economy study is accomplished using a structured procedure and mathematical modeling techniques. The economic results are then used in a decision situation that involves two or more alternatives and normally includes other engineering knowledge and input.

IEG2H2-ektek

The term engineering economic decision refers to any investment or other decision related to an engineering project

The five main types of engineering economic decisions are (1) service improvement, (2) equipment and process selection, (3) equipment replacement, (4) new product and product expansion, and (5) cost reduction

The factors of time, resource limitations and uncertainty are key defining aspects of any investment project

41

IEG2H2-ektek 42Mumu natapriatnaCellphone: 08122023600

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Instructor : Mumu Natapriatna Time : Wed,Thu, 08:30 to 12:30 pm Location : Telp. No. : 022 7311908

Mobile phone No.: 0812 2023600 Email: mumunata@gmail.com Office hours: Office location: C3

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IEG2H2-Engineering EconomyEven Semester, 2015Syllabus

Course Description:

The purpose for this course is to introduce the economic justification and decision making of engineering projects, programs, and organizational asset management. This course provide an introduction to discounted cash-flow analysis and its application to practical problems using spreadsheets, an understanding of how to structure practical decision problems and how to model them analytically as well as the role of, and the necessity for, engineering management of private and public organizations.Required Text：•William G. Sullivan, Elin M. Wicks, & James T. Luxhoj, “Engineering Economy,” 12th Ed., Pearson, 2003, ISBN 0-13-039555-2•Newnan, Donald G., “Engineering Economic Analysis”, Engineering Press,Inc., 1992, California, USA Other References：•Grant, Ireson, Levenworth, ” Dasar-Dasar Ekonomi Teknik”, PT Rineka Cipta, 2001, Jakarta •Thuesen, G.J. & Fabrycky, W.J., ” Engineering Economy”, 9th Edition, Prentice Hall, Inc., 2001, New Jersey, USA•DeGarmo, Sullivan, Bontadelli, Wicks, ”Engineering Economy”, Tenth Edition, Prentice Hall, Inc., 1997, New Jersey, USA•Steiner, H.M., ”Engineering Economy Principles”, Mc. Graw Hills International, 1996, Singapore •Grant, Ireson, Leavenworth, “Principles of Engineering Economy”, John Wiley&Sons, 1990, SingaporeTools:An ability to set up and manipulate simple spreadsheets in Excel is expected. The use of the HP-12C or T I financial calculator may be recommended.Grade:•Homework/Quiz 20% , •Midterm examination 25%, •Final examination 35%, •Project 20%, •Participation %,

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The policy for the student final grade will be based on: •> = 85 : A•70 – 84,99 : B• 55 – 69,99 : C• 40 – 54,99 : D•< 40 : EAssessment:•HomeworkHomework will be assigned about every week in the form of a problem set. For each problem set, 50% of the points will be awarded for completeness (i.e., a serious attempt at all problems), 50% will be allocated to accuracy in the selected problems. Homework is due at the beginning of the class in Room .... on its due date. Will be collected in class, graded, and returned. Late homework receives 1/2 credit. The basis for grading is effort – full credit for most incorrect answers.•ExamsThere will be a midterm exam in the 8th week in class. The final exam will be given after the 16th week. Mid-term and Final exam will be open book and notes in class exam. You are expected to take the midterm and final exam on the dates given. There are no makeup exams! If you have a justified scheduling conflict, you will have to make an arrangement with me one weeks before the exam. Any requests made after that day (other than documented emergencies) may or may not be granted.•Class ParticipationYour presence and participation in class are essential for gaining mastery of the material. At first sight it might seem to you that the concepts in this course are easy and might be quickly “crammed” before an exam. Experience shows that this first impression is more often than not incorrect, and in this course we therefore require your attendance and participation. From time to time there may be a mini-quiz in class. The results will enter into your class participation grade. Cellar phone is not allowed during the class. Please turn off your cellar phone before you enter the classroom. We will do 360 degree evaluation in each class.•ProjectAt least three students will be grouped as a project team. Two to three teams will be organized in the first class. Each team needs to find out a subject for your team project related to the course issues taught in the class and to develop a project by the team members together. A five-page written project report with double space & font size 12 point is required to submit before your final project presentation. Each team needs to present your projects in the 13th week of the semester. For the project, 60% of the points will be awarded for completeness of project based on the project report, 20% will be allocated to the team work, and 20% will be counted on the team presentation. Your team needs to submit Microsoft Power Point file as the team work, and 20% will be counted on the team presentation. Your team needs to submit Microsoft Power Point file as well as the final report before one week of the project presentation. No late report will be accepted and there is no makeup report! The 360 degree evaluation from each team will be used as a reference to assign a grade for each team. The final grades of project will be 95, 90, 85, 80, & 75.

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Week Date ContentReadingAssignment

1 Introduction to Engineering Economy WGS, Ch.1

2 •Cost concept•Money-time relationship (Time Value Of Money)

WGS, Ch.2,3

3 Economic Equivalence WGS, Ch. 3 4 Present Worth Method/analysis WGS, Ch. 4, 55 Annual Worth analysis; Quiz WGS, Ch. 4, 56 RoR Analysis WGS, Ch.4,57 BCR Analysis; Quiz WGS,Ch.118 Midterm Examination 9 PP and other analysis WGS, Ch.4,5

10 Sensitivity Analysis Newnan. Ch.911 Depreciation and Income Taxes; Quiz WGS, Ch.612 After Tax Cash flow Newnan,Ch.10,11

13 Replacement Analysis; Quiz WGS,Ch.9; Newnan, Ch.12

14 Project Presentation (1) 15 Project Presentation (2); Review16 Final Examination

Schedule：

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Case #1: Buy, Rent or Repair?

• You wreck your car! And you absolutely need one to get around.• A wholesaler offers $2,000 for the wrecked car, and $4,500 if it

is repaired. The car’s standing mileage is 58,000 miles.• Your insurance company offers $1,000 to cover the cost of the

accident.• To repair the car costs $2,000.• A newer second–hand car costs $10,000 with a standing mileage

of 28,000 miles.• A part–time technician can repair the car for $1,100, but it takes

a month. In the meantime, you need to rent a car, which costs $400 per month.

• Question: What should you do?

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No panic! • Apply the engineering economic analysis

procedure.

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Case #2Six college students are making plans for spring break. They are considering traveling 1200 miles to Florida by bus, train, plane, rental cars, or rental van. Due to bus and train schedules, they limited their options to plane, two rental cars, or a rental van.

The final data used in their analysis of transportation options are as follows: round-trip airfare per person ($300); daily rental rate for each car, all charges except fuel ($50); rental car gas mileage (20 miles/gallon); drop charge for each car ($150); daily rental rate for a van, all charges except fuel ($80); rental van gas mileage (12 miles/gallon); drop charge for the van ($225); cost to travel to or from the airport at the spring break destination ($50 per cab, two cabs required); and average price of gasoline ($4.25/gallon). If they keep the rental vehicle, the charges will be for 7 days; if they drop the rental vehicle, the charges will be for 2 days.

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Case #3

• A firm is considering three investment proposals (A,B, & C). A requires $1M investment, B requires $2.5M, and C requires $3M. The firm has $4.5M to invest. C is contingent on A; B and C are mutually exclusive. The “do nothing” alternative is not feasible. Form the set of mutually exclusive investment alternatives that exists.