Purdue School of Engineering and Technology

Purdue School of Engineering and Technology

Engineering Economics

ME 32700 / 3 Cr. (3 Class)

Engineering economics is the application of economic techniques to the evaluation of design and engineering alternatives. The role of engineering economics is to assess the appropriateness of a given project, estimate its value, and justify it from an engineering standpoint. This course covers the time value of money and other cash-flow concepts, reviews economic practices and techniques used to evaluate and optimize engineering decisions, and discusses the principles of benefit-cost analysis


Contemporary Engineering Economics, Park, Pearson, 6th Edition


To develop an awareness of cash flow approach, time value of money, product and project costing, and rate of return. To provide an introduction to the process of integrating engineering proposals with economic analysis in order to select among several viable alternative projects. To understand and appreciate the models and measures used in decision making in the area of engineering economics.


After completion of this course, the students should be able to:

  1. Understand the terminology used in engineering economicanalysis.
  2. Understand time-value-of-money concepts such as net present worth analysis, equivalent uniform annual worth analysis, benefit/cost analysis, internal rate of return analysis, loans, leveraging, and fixed-income investment analysis. 
  3. Understand the criteria for making economic-based decisions. 
  4. Analyze before-tax and after-tax cash flows. 
  5. Understand economic risk analysis techniques. 
  6. Conduct minimum life cycle cost tradeoffs between initial and repair costs. 
  7. Formulate economic solutions to real-world case study problems.
  8. Demonstrate capability to use Excel spreadsheet analysis insolving economic problems. 
  9. Experience working in a project team to solve an economicproblem and make a presentation of the solution using Powerpoint.
  10. Write a project report, adhering to the specified format for businessreports using appropriate writing style, grammar, and spelling. 
  11. Learn how to estimate costs and perform an economic analysis in support of capstone design and other term projects. 
  12. Develop cash flow analysis problem solving techniques for passing exams including the Engineering Economics portion of the EIT exam. 
  1. Engineering economic decisions
  2. Understanding financial statements
  3. Interest rate and economic equivalence
  4. Understanding money and its management
  5. Present worth analysis
  6. Annual worth analysis
  7. Rate of return analysis
  8. Estimating project cost elements
  9. Depreciation and corporate taxes
  10. Developing project cash flows
  11. Inflation and its impact on project cash flows
  12. Sensitivity and risk analysis
  13. Replacement analysis
  14. Capital budgeting decisions
  15. Economic analysis in the service sector