Unit ENGINEERING ECONOMY
- Course
- Engineering management
- Study-unit Code
- A002915
- Curriculum
- In all curricula
- Teacher
- Andrea Genovese
- Teachers
-
- Andrea Genovese
- Hours
- 54 ore - Andrea Genovese
- CFU
- 6
- Course Regulation
- Coorte 2026
- Offered
- 2026/27
- Learning activities
- Caratterizzante
- Area
- Ingegneria gestionale
- Sector
- IEGE-01/A
- Type of study-unit
- Obbligatorio (Required)
- Type of learning activities
- Attività formativa monodisciplinare
- Language of instruction
- English
- Contents
- The course introduces the principles and methods of Engineering Economy for engineering management students. It begins with an overview of firms, investment decisions, and fundamental cost concepts, including fixed and variable costs, direct and indirect costs, and break-even analysis. The course also provides an introduction to financial statements (Income Statement, Balance Sheet, and Cash Flow Statement) and basic financial ratio analysis, enabling students to interpret the economic and financial performance of industrial organizations.
The theory of the time value of money is then developed, covering simple and compound interest, economic equivalence, cash-flow modelling, single cash flows, uniform series, arithmetic and geometric gradients, and nominal versus effective interest rates. Building on these foundations, the course examines the economic evaluation of engineering projects through methods such as Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, and Annual Worth analysis. Techniques for comparing mutually exclusive alternatives and projects with different useful lives are also discussed.
The final part of the course addresses replacement analysis for industrial assets, as well as sensitivity and scenario analysis to support decision-making under uncertainty. Throughout the module, the methods are illustrated through applications drawn from manufacturing systems, renewable energy technologies, Industry 4.0 solutions, and artificial intelligence investments. - Reference texts
- Sullivan, W.G., Wicks, E.M. & Wilck, J.H. Engineering Economy, 18th Edition, Pearson. (Selected chapters: 1-8, 10-11, 13-14).
Additional teaching material (slides, case studies, solved exercises) on business organization fundamentals, financial statements, cost concepts, and industrial applications will be provided by the lecturer during the course and made available on the University e-learning platform. - Educational objectives
- By the end of the course, students will be be able to:
1. Explain the role of economic analysis in engineering decision-making and interpret the main financial statements (Income Statement, Balance Sheet, and Cash Flow Statement) of an industrial firm.
2. Apply cost concepts (fixed and variable costs, direct and indirect costs, relevant and irrelevant costs) to perform break-even and contribution margin analyses in manufacturing and engineering contexts.
3. Use the principles of the time value of money to solve economic equivalence problems involving single cash flows, annuities, gradients, and variable interest rates.
4. Evaluate the economic viability of engineering projects using Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, and Annual Worth methods.
5. Compare alternative engineering investments with equal or unequal useful lives and perform replacement analyses for industrial assets and equipment.
6. Conduct sensitivity and scenario analyses to assess the impact of uncertainty on engineering investment decisions and technology adoption. - Prerequisites
- No specific formal prerequisites are required beyond knowledge of the English language and basic mathematical skills acquired in secondary school (elementary algebra, linear and exponential equations, logarithms). No prior knowledge of economics or business organization is required.
- Teaching methods
- The module consists of lectures and tutorials for a total of 54 contact hours. Lectures combine theoretical explanations with worked examples and are supported by PowerPoint presentations and board work. Tutorials focus on the solution of quantitative problems, the analysis of real-world engineering and industrial case studies, and workshops on the interpretation of financial statements.
Students will also develop practical skills in the use of spreadsheets (Microsoft Excel) for cash-flow modelling, investment appraisal, break-even analysis, and sensitivity analysis. Students will be encouraged to bring their own laptops to selected sessions involving spreadsheet-based exercises and data analysis activities.
All teaching materials, including lecture slides, tutorial exercises, datasets, and supplementary readings, will be made available through the University’s virtual learning environment. - Other information
- Attendance is not mandatory but is strongly recommended, given the progressive and cumulative nature of the content.
The lecturer is more than happy to receive students for feedback and consultation provision. Office hours will be communicated at the beginning of the course and published on the lecturer's webpage. - Learning verification modality
- Students will be assessed through a 2-hour written exam consisting of quantitative problems (economic equivalence calculations, investment appraisal, comparison of alternatives) and conceptual questions on the principles of engineering economy, financial statements, and cost analysis. The use of a scientific calculator is permitted during the exam.
- Extended program
- The full articulation of the module is provided below. Please note, this is just indicative content, which might be adapted according to circumstances.
Week 1: Introduction to Engineering Economy. Why engineering decisions have economic consequences. Firms, investments and value creation. Elements of business organization and value creation: purpose and structure of the industrial firm. Revenue, costs, profit and cash flow. Introduction to the Income Statement: revenue, operating costs, depreciation, EBIT and net income. Worked examples from industrial firms.
Week 2: The Balance Sheet: assets, liabilities and equity. Understanding industrial assets and capital investments. Basic financial ratio analysis. The Cash Flow Statement: operating, investing and financing cash flows. Profit versus cash. Financial statement interpretation workshop.
Week 3: Cost concepts for engineers. Fixed and variable costs. Direct and indirect costs. Relevant and irrelevant costs for decision-making. Contribution margin analysis. Break-even analysis. Operating leverage. Applications to manufacturing systems.
Week 4: Introduction to the Time Value of Money. Simple interest. Compound interest. Economic equivalence. Cash flow diagrams. Single cash-flow analysis. Present and future value relationships.
Week 5: Present worth and future worth calculations. Engineering applications and investment examples. Uniform series and annuities. Present worth and future worth of recurring cash flows.
Week 6: Arithmetic gradients. Geometric gradients. Complex cash-flow structures. Nominal and effective interest rates. Continuous compounding. Interest rates that vary over time.
Week 7: Investment appraisal principles. Minimum Attractive Rate of Return (MARR). Project cash-flow modelling. Present Worth / Net Present Value (NPV) Method. Decision rules. Industrial investment examples.
Week 8: Future Worth Method. Annual Worth Method. Comparison of appraisal methods. Internal Rate of Return (IRR). Payback Period. Strengths and limitations of common evaluation methods.
Week 9: Comparison of alternatives. Mutually exclusive projects. Independent projects. Equal-life alternatives. Unequal-life alternatives. Study period analysis. Equivalent annual worth approach.
Week 10: Replacement analysis. Defender and challenger concepts. Economic life of engineering assets. Replacement decisions for industrial equipment. Applications to production systems and automation technologies.
Week 11: Risk and uncertainty in engineering decisions. Sensitivity analysis. Introduction to scenario analysis and probabilistic approaches. Contemporary applications of Engineering Economy: renewable energy systems; Industry 4.0 investments; AI-enabled technologies. Course review and preparation for assessment. - Obiettivi Agenda 2030 per lo sviluppo sostenibile
- The course contributes to the achievement of the following Agenda 2030 Goals:
Goal 4 (Quality Education): by equipping engineering management students with skills for informed and sustainable investment decisions;
Goal 9 (Industry, Innovation, and Infrastructure): by analysing investments in Industry 4.0, automation, robotics, and AI;
Goal 12 (Responsible Consumption and Production): by promoting replacement decisions for efficient resource use.