When we submit engineering proposals, we often have to overcome a number of physical limitations in order to come up with the "best" way of solving a problem.But we should also ask ourselves, "Is this the most economical way of solving the problem?"
We must be able to speak both our "technical language" and the "language of managers" (paraphrasing slightly from quality guru Joseph Juran). Managers are concerned with the bottom line and want to ensure that resources are being used in the best way possible.As engineers, we too have a similar responsibility as we protect the welfare of the public.
The field of engineering economics, formerly known as engineering economy, estimates the costs and potential savings of proposals, and then determines if the proposals make "money-sense". Because the value of money today is not the same as money in the future, we must account for the time value of money, and calculate the proposal's "net present value" based on a rate of return desired by the organization.
Back in those engineering economy days, we often would have to go to tables of numbers and look up the correct "factors" to use to calculate present values and future values. We would have to "interpolate" from the tables if we were to use an interest rate of 7.5% (because the tables skipped from 7% to 8%).It was difficult to "back into" a rate of return for a proposal, or to estimate how long it may take to recoup an investment based on a desired rate of return. (Dare I mention slide rules?)
When you take this course, you will see that MS Excel has quite a few functions that will speed through calculations involving present value, future value, annuities, rates of return, and others. Woven throughout the course are engineering, business, and personal illustrations to help you better relate to the time value of money and the rate of return.
Engineering economics is not easy.But after completing this course, you should be able to see how Excel can make it "easier".
The FREE Microsoft Excel® spreadsheet that accompanies this course will be available for download after purchase. You will need Excel version 1997 or later to open the file.