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.