Engineering Economics

General characterization

Prerequisites

- To be familiar with the terminology and accounting concepts of balance sheet and income statement;

- Ability to understand and interpret financial and economic information for use in decision making

Bibliography

Azevedo, R. and Nicolau, I., "Elementos de Cálculo Financeiro", Rei dos Livros, Lisboa, 1983.

Blank, L. T. and Tarquin, A. J., "Engineering Economy", Macgraw-Hill Editions-Industrial Engineering Series, Singapore, 1998.

Fernandes, L.S., "Noções Fundamentais de Cálculo Financeiro", Imprensa Nacional- Casa da Moeda, E.P., Lisboa, 1985.

Nabais, C. F., "Cálculo Financeiro", 1ª Edition, Editorial Presença, Lisboa, 1989.

Oliveira, J. N., "Engenharia Económica: uma abordagem às decisões de investimento", Editora Mcgraw-Hill do Brasil Lda., S. Paulo, 1982.

Sullivan, W. G., Elin M. W. and James T. L. (2006). Engineering Economy, 13th Edition. New Jersey: Pearson Prentice Hall, Inc. 

White, J., Agee, M:H: e Case, K:E:, "Principles of Engineering Economics Analysis", Editions J. Wiley & Sons, New York, 1989

Matias, R. (2018) Cálculo Financeiro - Teoria e Prática. 6aEdição. Lisboa: Escolar Editora.

Teaching method

In order to facilitate the development of competencies, this course use different pedagogical approaches. 

- Lectures;

- Exercises from Sebenta;

- Exercises/exams from previous years;

- Case studies; 

- Discussion of group projects.

Evaluation method

The evaluation of the curricular unit (CU) consists of two tests (T1 and T2) and / or examination.
The continuous assessment of the CU consists of 2 tests (T1 and T2). The final grade is calculated using the formula

Final grade = 0.40 T1 + 0.60 T2

For the purposes of calculating the final grade, the mark of each assessment component is rounded to hundredths. The approval of the CU, by continuous assessment, requires a minimum score of 9.5 points, on a scale from 0 to 20, on the weighted average of the two tests.

There is no minimum score for the tests. However, a student will only be entitled to take the 2nd Test (T2) if he has taken the 1st Test (T1) without having dropped out.

If a student has not passed the continuous assessment (by failure or absence), he/she may take the Exam of Appeal. In this case, the final grade will be the exam grade rounded up. Rounding is done to the nearest hundredth with the following interpretation: equal or above 0,50 passes to the next integer (ex: 12,50 = 13 values).

Subject matter

1. Introduction to Financial Calculus

• The time value of money
• Capitalization and Actualization: Concepts and Factors 
• Equivalence of capital
• Interest rates: nominal and effective interest rates 
• Annuities
• Loan amortization
• Financial leasing

2. Economic Engineering and the Decision Making Process

• The process of Economic Engineering analysis and the stages of an Engineering Project
• Equity perspective of a company
• Balance sheet and income statement
• Net cash and working capital
• The Cash Flow diagram
• Capitalization and discount factors
• Arithmetic and geometric gradients: definition and deduction

3. Investment Project Appraisal - stand alone projects

• Net Present Value (NPV) 
• Cost-benefit ratio index (RBC)
• Internal rate of return (IRR)  
• Payback period (PRC)
• Annual equalized value (EAV)

4. Evaluation of Investment Alternatives in Particular Contexts

• Inflation in Economic Engineering Studies
• Current Prices and Constant Prices
• Depreciation methods
• Influence of taxes and depreciation on the comparison between investment alternatives
• Analysis of investment alternatives in a context of financial constraint

Programs

Programs where the course is taught: