IE 50 THU Second Semester, AY 2014-2015

COURSE SYLLABUS
Course Number and Title: IE 50 - Engineering Economics for Industrial Engineering
Course Description:
Concepts and tools of economic analysis for decision-making. Interest and money-time
relationships. Single and multiple project evaluation. After-tax economy studies. Decisions
recognizing risk and uncertainty.
Prerequisite Course:
Acctg 1 - Introduction to Financial Accounting
Course Credit:
3 lecture hours, 3 credit units.
Course Objectives:
To enable the student to:
1. Perform economic evaluation of engineering projects under conditions of certainty, risk,
and uncertainty.
2. Solve problems and make decisions involving capital investments.
Learning Outcomes:
At the end of the course, the student will be able to:
1. Describe the fundamentals of engineering economics and the basic principles of the time
value of money.
2. Draw cash flow diagrams and formulate cash flow models for different situations.
3. Convert the types of interest rates: nominal, effective, and interest rate per interest period.
4. Compute equivalent values for single payment, uniform series, and gradient cash flows at
different points in time.
5. Determine the acceptability of single projects using the present worth, future worth, annual
worth, internal rate of return, and external rate of return methods.
6. Select the preferred mutually exclusive alternative using equivalent worth and rate-ofreturn methods.
7. Recognize and factor in the effects of inflation in engineering economic studies.
8. Calculate the depreciation of assets using the straight line, sum-of-the-years-digits,
declining balance, and double declining balance methods.
9. Evaluate projects and alternatives using after-tax analysis.
10. Perform before- and after-tax replacement studies on existing assets and proposed
alternatives.
11. Determine the expected value of a project using discounted decision tree analysis.
12. Choose the preferred alternative using decision rules under conditions of uncertainty.
Learning Resources:
IE 50 lecture materials.
Sullivan, William G., Elin M. Wicks, and C. Patrick Koelling, Engineering Economy,
15th ed. (Philippine Edition), Prentice Hall, 2011; ISBN 978-981-0696-27-6.

Course Outline:
Mtg.
Date
No.
1
20 Jan (Tue)

Matl.
No.

22 Jan (Thu)

L01

27 Jan (Tue)

L02

29 Jan (Thu)

L03

03 Feb (Tue)

L04

05 Feb (Thu)

L05

7
8

10 Feb (Tue)
12 Feb (Thu)

R1, P1

17 Feb (Tue)

L06

10

24 Feb (Tue)

L07

11

26 Feb (Thu)

L08

12
13
14

03 Mar (Tue)
05 Mar (Thu)
10 Mar (Tue)

L09
R2, P2

15

12 Mar (Thu)

L10

16

17 Mar (Tue)

L11

17

19 Mar (Thu)

L12

18

24 Mar (Tue)

L13

19
20
21

26 Mar (Thu)
31 Mar (Tue)
07 Apr (Tue)

L14
R3, P3

22

14 Apr (Tue)

L15

23

16 Apr (Thu)

L16

24

21 Apr (Tue)

L17

25

23 Apr (Thu)

L18

26

28 Apr (Tue)

L19

27
28
29
30

30 Apr (Thu)
05 May (Tue)
07 May (Thu)
14 May (Thu)

R4, P4

Topics
Course details. Class policies.
Definitions. Principles of engineering economics. Engineering
economic analysis procedure. Cost concepts.
Present economy studies. Money-time relationships. Simple
and compound interest. Interest rate. Cash flow diagram. Types
of cash flows.
Equivalence equations: single cash flows, uniform series.
Reciprocal equivalence relationships.
Deferred uniform series. Beginning-of-period cash flows.
Uniform gradients. Geometric gradients. Composite cash flows.
Nominal and effective interest rates. Cash flows and
compounding periods. Continuous compounding.
Review of First Long Examination topics.
First Long Examination
Minimum attractive rate of return. Basic economy study
methods, equivalent worth methods: present worth, future
worth, annual worth. Capitalized worth method.
Basic economy study methods, rate of return methods: internal
rate of return, external rate of return.
Selections among alternatives: concepts. Mutually exclusive
alternatives: equal lives, unknown revenues.
Mutually exclusive alternatives: equal lives, known revenues.
Review of Second Long Examination topics.
Second Long Examination
Mutually exclusive alternatives: unequal lives, unknown
revenues.
Mutually exclusive alternatives: unequal lives, known revenues.
Independent alternatives. Contingent alternatives.
Consideration of inflation.
Depreciation: straight line, sum-of-the-years-digits, declining
balance methods.
Income taxes. After-tax economy studies.
Review of Third Long Examination topics.
Third Long Examination
Replacement analysis: before-tax and after-tax replacement
studies.
Economy studies for public projects. The benefit-cost ratio.
Decisions recognizing risk. Measures of risk: payback period
method, breakeven analysis, sensitivity analysis, scenario
analysis.
Discounted decision tree analysis. Expected value of perfect
information.
Decisions admitting uncertainty. Decision rules under
uncertainty.
Review of Fourth Long Examination topics.
Fourth Long Examination
Comprehensive review.
Final Examination

Teaching and Learning Activities:

The course will be conducted with lectures and class discussions.
Assessment Methods:
Student learning will be assessed using four (4) Long Examinations and a Final Examination.
Final Grade Evaluation:
The computed grade for the course will have the following components:
Four (4) Long Examinations
Final Examination
Attendance

60%
35%
5%

Attendance will be checked. Any unexcused absence beyond the maximum number of six (6)
will have a corresponding deduction. The Attendance component will have a range of 5% (full
attendance) to 5% (12 or more unexcused absences).
A student who gets an average of 75% in the four Long Examinations need not take the Final
Examination. For exempted students who do not take the Final Examination, the final grade will
be computed as: Average of Long Examinations 0.95 + Attendance 0.05. For exempted
students who will take the Final Examination, the final grade will be computed according to the
original formula.
The computed grade will be converted to a final grade according to the following table:
Computed Grade
90 - 100
85 - 89
80 - 84
75 - 79
70 - 74
67 - 69
64 - 66
62 - 63
60 - 61
50 - 59
0 - 49

Final Grade
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
4.00
5.00
INC
DRP

Course Policies:
Attendance is compulsory.
Decisions regarding missed examinations will be done on a case-to-case basis.
Cases of dishonesty on attendance and examinations will be dealt with severe penalties.
Instructor:
Prof. Edgardo G. Atanacio
MH402, Department of Industrial Engineering and Operations Research
College of Engineering, University of the Philippines Diliman
Consultation: 1-3 pm, Monday to Friday; other times by appointment
e-mail: egatanacio@up.edu.ph