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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:

Course Introduction

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:

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.

Take a Quiz

DISCLAIMER: The materials contained in the online course are not intended as a representation or warranty on the part of 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.