Engineering Finance
Paul A. Jensen

 


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This course is about the financial aspects of decisions related to engineering projects. We focus on projects because so often the engineering activity is aimed at attaining specified ends using available or purchased resources within a fixed time. The specification of the goals, means, limits and measures define the project. A principal activity of an engineer is to propose solutions for the problem posed for a project and select the best among the alternatives.

Projects often involve investments that must be justified by future financial profits. The course deals with estimating the financial impacts of a project especially with regard to the cash flows provided by receipts and expenditures over time. We describe how a cash flow can be expressed as a single equivalent measure and evaluated as to its financial acceptability. We then provide the tools to compare alternative solutions with the goal of accepting the best.

Because most projects involve cash flows that occur in the future, risk or uncertainty is always present. Throughout the course we consider the effects of risk on the financial aspects of decisions. Of course there are no sure answers to questions involving risk, so several methods are introduced to aid decision makers, including deterministic measures, probability, and simulation.

Once a project is adopted it must be carried out, and engineers often are involved in project management. The last part of the course presents the tools of project management. A project is described by a collection of activities that must be accomplished to complete the project. Different subdivisions of an organization will be responsible for certain activities while others may be assigned to outside contractors. The problem is to schedule the activities so that they are performed in the proper order without exceeding available resources. Again, cash flows play a role with some activities requiring expenditures and some resulting in receipts.

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About this Course

We have prepared a special lesson to explain the features of the course. Click the reference to go to that lesson. It is important to review this lesson to learn about the organization of this web site and how to navigate through its resources.

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Engineering Finance
by Paul A. Jensen
Copyright 2005 - All rights reserved