Sys. Eng. 6103 Economic Analysis of Systems Engineering Projects

Sys. Eng. 6103 – Economic Analysis of Systems Engineering Projects

Course Overview This course covers capital investment analysis from an engineering economics and systems engineering perspective. Topics will include: an explanation of cost concepts, cost estimating, life-cycle costing, interest, equivalence, present worth, equivalent worth, rate of return methods, economic comparisons of alternatives, depreciation and taxes, inflation and price changes, benefit-cost analysis, replacement analysis, capital planning and budgeting, and an introduction to risk and uncertainty analysis.

Although this is a graduate course, the course is designed to begin with basic engineering economy concepts to allow graduate students without previous exposure to engineering economy and cost analysis to master the necessary concepts before moving on to advanced topics.

Instructor Dr. Tim Ferris Email: [email protected]; OR (preferred) [email protected] . Please start your subject line: Sys. Eng. 6103 Phone: +61 8 8302 3409 (office) Please note the time difference. I am located in Adelaide, Australia. As a reference: 5:30pm in Missouri maps to 8:00am of the following day of the week in Adelaide, at this time of the year with our respective daylight saving settings.

Text Life-Cycle Cost and Economic Analysis, Wolter J. Fabrycky, Benjamin S. Blanchard, Prentice Hall, 1991, ISBN: 0-13-538323-4

This text is used because it is the only textbook of which we are aware which takes a lifecycle perspective on the engineering economics issues. The book is made available through the MST book shop in an authorized reproduction because the original text is now out of print by many years, and very hard to obtain at a reasonable price.

Software Microsoft Excel and other MS Office. (Both 2003 and 2007 compatible files (.doc, .docx, .xls, .xlsx) are acceptable.)

1 Grading Assignment Points EE Presentation (individual) 100 Homework 1 50 Homework 2 50 Homework 3 50 Test 1 150 Test 2 150 Test 3 (final exam period) 200 Individual project 250 Total 1000

Course Material Class notes, homework assignments and solutions, test solutions, practice problem solutions, and archived lectures will be posted on Blackboard (http://blackboard.mst.edu). The lecture schedule below contains a listing of the topics discussed during each class period. Students will be notified by email, Blackboard, or alerted in class when significant changes are made to the lecture schedule.

Individual project: Project to produce a ‘paper’ on a negotiated topic Students will select one of several topics made available by the instructor as the focus of their paper. Students may negotiate variations on the topic which may change emphasis etc. Assessment will be based on the written paper (approximately 2000 words).

Homework Problem Sets – to be turned in Homework is due by midnight (Missouri time) on the date indicated on the syllabus. Show complete work in the derivation of answers. Use a spreadsheet with ‘live’ formulae to implement the equations. Construct the formulae from their mathematical descriptions, do not use the prepackaged functions in Excel. Highlight answers in the Excel sheet. Use 1 Excel sheet per 1 Exercise (question), and label the sheet tab with the Exercise #. Please use a file name that includes your own name and a reference to the assignment: e.g. Label files as ‘Doe_Jane_6103_Hw1.xls.’ Homework problem sets are to be treated as individual assignments.

Problem Set #1: 5 exercises, Chapters 1-4 Problem Set #2: 5 exercises, Chapters 5-8 Problem Set #3: 5 exercises, Chapters 9-13

Homework problems will be distributed several weeks before they are due, and students will be notified when they are made available through Blackboard. NO COLLABORATION IS ALLOWED ON HOMEWORK.

Engineering Economy Presentations 20-minute individual presentations on topics related to Engineering Economy with Systems

2 Engineering or other engineering disciplines are very appreciated by the class. Every presentation should describe a scenario of interest and construct a numerical solution to a financial model constructed using the concepts taught in the course. Topic scenarios should be constructed to be realistic, but do not include any data which is sensitive to your employer. Hypothetical scenarios or scenarios taken from personal finance (which apply the principles of analysis taught in the course) are acceptable. The situation analyzed should develop a reasonably complex situation – either through the problem modeled being inherently fairly complex, or through comparative analysis of different ‘what-if’ cases. PRESENTATIONS ARE TO BE MADE INDIVIDUALLY.

Tests Topics for each test are: Test1: Chapters 1-4 Test2: Chapters 5-8 (which build on concepts in 1-4) Test3: All chapters of the textbook Tests 1 and 2 will contain 5 Homework-style questions. Test 3 will contain more Homework-style questions. NO COLLABORATION IS ALLOWED ON TESTS.

Tests will be conducted as “take home exams”. Tests 1 and 2 will be due at midnight on the Sunday 54 hours after release. Check the schedule for dates. Test 3 (more questions) will be released at 1am on a Saturday and due at midnight on the Monday, 71 hours after question release. (Weekends have been chosen to attempt to avoid the impact of work on availability to do the test, and the whole weekend method seeks to accommodate various personal or religious activities which may fall on the weekend or restrict the use of a particular day of the week.)

3 Schedule

Topic Assessment Task Date Lecture # (subject to shifting) Course Introduction 8/Jun/2015 1 Chapter 1: System Life-cycle Concepts Chapter 2: Economic and Cost 10/Jun/2015 2 Concepts Chapter 3: Interest Formulas and 15/Jun/2015 3 Equivalence Chapter 4: Alternatives and Homework 1 due 17/Jun/2015 4 Decision Making midnight 21/Jun Chapter 5: Decision Evaluation 22/Jun/2015 5 Theory Test 1 Chapter 6 24/Jun/2015 6 Start 6pm 26/Jun Life-cycle Costing Methodology Due midnight 28/Jun Chapter 7: Estimating Cost and 29/Jun/2015 7 Economic Elements Chapter 8: Evaluating Errors in Homework 2 due 1/Jul/2015 8 Estimating midnight 5/Jul Chapter 9 6/Jul/2015 9 Life-cycle Economic Evaluations Test 2 Chapter 10: Life-cycle 8/Jul/2015 10 Start 6pm 10/Jul Optimization of Alternatives Due midnight 12/Jun Chapter 11: Life-cycle Cost in 13/Jul/2015 11 Program Evaluation

Chapter 12: Communication Homework 3 due 15/Jul/2015 12 System Procurement midnight 19/Jul Chapter 13: Repairable Equipment Individual paper 20/Jul/2015 13 System Design Due midnight 22/Jul Test 3 Presentation/s (unless all completed 22/Jul/2015 14 Start 1am 26/Jul previously) Due midnight 26/Jul

4 27/Jul/2015 15 Time for assessment

29/Jul/2015 Time for assessment

Grading Scale The grading standard for the course is: A is for students who demonstrate strong mastery and insight in relation to the course material. To attain this grade students will be expected to demonstrate insight into the material and its significance. B is for students who dutifully demonstrate competence in the course material. To attain this level students will demonstrate the ability to achieve correct answers and to operate upon the knowledge content of the course in a normal and routine manner. C is for students who degrade the course with late submissions, etc. Students may obtain this grade if they do not always attain correct answers, as are expected to achieve a B grade. F is for failure to understand the course material.

Employers and schools need grade differentiation. The grading scale is: >90% A >80% B >70% C <70% F

CHEATING WILL BE DEALT WITH SEVERELY. Cheating is a strict liability offense to the Department, the University and Society, and, as such, must be dealt with when detected. Cheating, when the objective assessment of an exam is required, is also an offense of dishonesty to oneself. Cheating carries a mandatory sentence of a C grade, and worse consequences are available. Past experiences show that cheating is unfortunate to all involved. Cheating and Plagiarism are the worst academic offenses – so stay away from them!

Asking for consideration: Only ask for extra consideration if you are able to demonstrate extraordinary cause, that is, something outside your control has impacted on your ability to perform the work required for the course. Consideration will be granted on account of documented medical or compassionate grounds. For medical grounds the amount of extension provided will be the amount of time that the medical certificate indicates the student was unable to work/study.