OUTLINE

1. OUTLINE • Introduce Instructor • Introduce yourselves • Registration for www.gezabottlik.com • Questionnaire (on line – www. gezabottlik.com) • Background Quiz (on line – www. gezabottlik.com) • Beginning of semester survey (on line – www. gezabottlik.com) • Resume • Grades • What do you expect to get out of this class? • Go over syllabus • Sample homework solution • How to get a passing or better grade • Posting of grades, assignments and lecture notes • Use of Excel • Go over first assignment (due 06/02)

2. Registration • Please register on www.gezabottlik.com as soon as possible. • This allows us to have private information for this class and helps me develop a more comprehensive website to supplement (and eventually replace) the Blackboard website • You will also use this site to • Take the questionnaire • Take the background quiz • Take the beginning of semester survey • Obtain solutions to homework • View resumes • Check grades

3. Questionnaire • The questionnaire is used by the instructor to get demographic data about all his classes and to assess trends in technology and teaching effectiveness as well as to support accreditation • The data are confidential and are summarized to help in preparing relevant and interesting classes • You will get to see your class incorporated into these data

4. Resume • Please provide a one page digital resume that: • Does not have your address or phone number in it • Tells me and your class mates about yourself • Is modeled on a brief resume used to get employment • Contains a 1 by 1 inch picture of you

5. Grades • Grades vary from class to class. The overall percentages for my undergraduate classes and the 460 summer classes are shown in the pie chart below. This summer class has been better than the general distribution.

6. Grades vs. Learning • Grades are important, but relatively temporary • Learning is forever • It is an enduring change in knowledge • It is the ability to apply material in a different context

7. What do you expect to get out of this class?

8. How to get a passing or better grade • Everyone has their own way of studying and dealing with a class • The following slides have suggestions of methods that could improve your performance in this or any other class

9. How to get a passing or better grade (continued) • Learn Excel • Create an organized three ring binder or similar resource (laptop works for me) • Read ahead for every class session - material is provided in the assignment and on the web most of the time • Come to lecture for the whole session • Bring your text, class notes (from the web) and notebook to class • Stay awake and participate • Ask questions (there are no stupid questions!!) – if something isn’t clear to you, ask right away!! THIS IS MOST IMPORTANT • Take notes on the posted class notes

10. How to get a passing or better grade (continued) • Do homework at leisure and early in the time allotted. If you start early, you can ask questions in class about it. Make sure it is correct. Revisit it at least once. • If you have trouble with the homework (in this order): • Ask another classmate (be sure you get to know as many people in class as soon as you can) • E-mail the instructor (do not ask for info that is in the syllabus!!) • Compare your returned homework to the provided answers and resolve any differences • Reread the material after the class for understanding • Do the examples in the book in Excel – very important

11. How to get a passing or better grade (concluded) • Work hard early in the semester instead of scrambling at the end – there is no final in this class, only weekly quizzes • Don’t let either the simplicity or apparent complexity of the material fool you • Check the web pages for current information

12. Posting of grades, assignments and lecture notes • The following items will be available on the website each week: • Lecture notes at least up to and including the notes for the current week • Assignments up to and including the current assignment • Grades will be posted every week. These will include items for the previous two weeks. Please check them for accuracy -- you have two weeks to have corrections made

13. Use of Excel • Spreadsheets are the mainstay of all financial analysis • Excel is the most widely used, and most powerful of the currently available spreadsheets • We will use Excel to demonstrate the material in this class and to solve most of the homework problems • You will find that Excel is also very useful for all your other classes and will be an invaluable aid on your first job. Graduates and interns comment frequently how useful it is to them – especially the VBA) • So – learn it as fast as you can. I will assist you with demonstrations and answer your questions about it

14. Expectations • Ethical behavior. • Effort. • Contribute to the classroom experience. Participate! • Understand the big picture. • Stay aware of current events in this field. • Develop technical competence.

15. THE BIG IDEAS • Time value of money / Cash flow equivalence • Return on Investment – ROI • Knowing what matters – sunk costs and marginal costs • Market forces • Where do we put our resources?

16. Attendance and Preparation • What you get out of class is different than the book or the homework • I expect everyone to be here for most of the sessions, while understanding that there are rare occasions when you do have something urgent to do • Come to class prepared, that is, having read the material that will be covered that session. This material may be included in quizzes

17. What are my objectives when I prepare a lesson plan? • To make sure that you are sufficiently proficient to enhance, and certainly not to damage the reputation of USC • That you learn enough to function in a professional job with material that will be useful to you • Help you all get a good grade • Make each of the 110 minutes a pleasant experience for all of us

18. I have selected a few slides provided with your text to give you an idea how the author thinks of this subject

19. Types of Strategic Engineering Economic Decisions • Equipment and Process Selection • Equipment Replacement • New Product and Product Expansion • Cost Reduction • Service Improvement • Public Works • Cost Effectiveness

20. Chapter 1Engineering Economic Decisions • Rational Decision- making Process • Role of Engineers in Business • What Makes the Engineering Economic Decision Difficult? • Types of Strategic Engineering Economic Decisions • Fundamental Principles in Engineering Economics

21. Rational Decision-Making Process • Recognize a decision problem • Define the goals or objectives • Collect all the relevant information • Identify a set of feasible decision alternatives • Select the decision criterion to use • Select the best alternative

22. What Makes the Engineering Economic Decision Difficult? - Predicting the Future • Estimating a Required investment • Forecasting a product demand • Estimating a selling price • Estimating a manufacturing cost • Estimating a product life

23. Role of Engineers in Business • Create & Design • Engineering Projects • Evaluate • Expected • Profitability • Timing of • Cash Flows • Degree of • Financial Risk • Evaluate • Impact on • Financial Statements • Firm’s Market Value • Stock Price • Analyze • Production Methods • Engineering Safety • Environmental Impacts • Market Assessment

24. Two Factors in Engineering Economic Decisions The factors of time and uncertainty are the defining aspects of any engineering economic decisions

25. A Large-Scale Engineering Project • Requires a large sum of investment • Takes a long time to see the financial outcomes • Difficult topredict the revenue and cost streams

26. Fundamental Principles of Engineering Economics • Principle 1: A nearby dollar is worth more than a distant dollar • Principle 2: All that counts is the differences among alternatives • Principle 3: Marginal revenue must exceed marginal cost • Principle 4:Additional risk is not taken without the expected additional return

27. Summary • The term engineering economic decision refers to any investment decision related to an engineering project. • The five main types of engineering economic decisions are (1) service improvement, (2) equipment and process selection, (3) equipment replacement, (4) new product and product expansion, and (5) cost reduction. • The factors of time and uncertainty are the defining aspects of any investment project.

28. The Far Side – Gary Larson