Print this page Six Ways To Perform Economic Evaluation of Projects
A. Bhatia, B.E.
Course Outline
This 2-hour course
discusses the money issues. The objective is that while engineers find it necessary
to learn the basic accounting and business principles to communicate with accountants;
few accountants are willing to learn the engineering details. The basic cost
evaluation techniques presented in the course shall help engineers to 'think
like MBAs and act like engineers'.
This course is designed to meet the continuing professional development needs
of individuals for evaluating different alternatives of infrastructure projects.
The concepts could be applied to any new, retrofitting, expansion and modification
projects. It is intended for students, managers, engineers, architects, scientists,
auditors, campaigners, academics, equipment manufacturers and designers.
This course includes
a multiple-choice quiz at the end, which is designed to enhance the understanding
of the course materials.
Learning Objective
At the conclusion of this course, the student will:
- Be aware of the fundamentals of cost analysis
- Be aware of commonly-used financial terminology and concepts
- Be able to judge
and select the right project alternative.
Installed costs
and capital offsets are important economic parameters for evaluation of proposed
investment. The concept of money having a time value is fundamental to understanding
any economic or financial analysis. Money has a time value since it can be invested
at some particular interest rate and will grow over time.
The course provides basic fundamentals of cost evaluating that shall be useful
in managing resource development and project management.
Course
Content
The the course content is in a PDF file Six Ways To Perform Economic Evaluation of Projects. You need to open or download this document to study this course.
Course
Summary
The course presents
the basic understanding of the fundamental concepts and terminology used to
calculate the cash flow alternatives. The procedure may be greatly simplified
by the use of readily available software programs, but understanding of these
concepts remains vital particularly for the individuals who have not had any
previous experience in this area.
Fundamentals of cost analysis cover 6 ways of computing the profitability. These
are:
- Payback Method
- Return on Investment (ROI)
- Total life cycle cost (present value method)
- Savings/investment ratio (benefit/cost ration method)
- Net present Value (NPV)
- Internal rate of return (IRR)
While the first
two methods viz. the Payback and the ROI are not fully consistent with LCC approach
in that they don't take into account all relevant values over the entire life
period and discount them to a common time basis, these are simple, quick and
convenient assessment of first level measure of profitability. These are good
for the projects that do not involve major capital investments. The other 4
methods use discounting techniques to assess the present and future value of
money and are recommended for the capital intensive projects.
In any case, which method to use is your judgment or the management's prerogative?
Related Reading
Life Cycle Assessment
for Building Projects
HVAC system is a significant proportion of the overall building cost. Life cycle
assessment (LCA) is a decision making process that is applied to large scale
building projects for evaluating the appropriate selection. The LCA takes into
account all capital costs, recurring operation & maintenance (O&M) expenses,
replacement costs, energy, environment and the code issues for the life cycle
of equipment. The overview of life cycle assessment (LCA) is presented in a
course titled 'Life Cycle Assessment for Building Projects'.
This is a generic 2-hour course recommended for engineering and financial planners.
Once
you finish studying the
above course content,
you need to
take a quiz
to obtain the PDH credits.
DISCLAIMER: The materials contained in the online course are not intended as a representation or warranty on the part of PDHonline.com or any other person/organization named herein. The materials are for general information only. They are not a substitute for competent professional advice. Application of this information to a specific project should be reviewed by a registered professional engineer. Anyone making use of the information set forth herein does so at their own risk and assumes any and all resulting liability arising therefrom.
