Engineering Finance

The emphasis of this course is on the economics of projects. The first two lessons establish the prevalence of projects in an engineer's work activities and describe the importance of financial aspects of a project to the financial success of the sponsoring corporation. A project involves investment, expenses and revenues. A profit-making organization has the goal of making a profit and non-profit organizations and individuals have the goal of using their available funds effectively.

The remaining lessons focus on estimating costs and revenues associated with the installation and the life cycle of the project. Two lessons introduce risk as a feature of estimation and use probability theory and simulation for analysis.

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  • Economics and the Engineer
    This lesson describes how economics and finance pervade the modern world and how they are important for engineering practice. Corporations show their financial status and activities with financial statements. The lesson provides an introduction.
  • Engineering Projects
    This lesson identifies the features of projects and focus on aspects of particular interest to this course. The work of an engineer is often organized into projects.
  • Capital Costs
    This lesson is about estimating the expenses associated with capital project. The cash flow of the capital costs indicates how the expenditures are distributed in time.
  • Life-Cycle Costs
    This lesson is about estimating the life cycle costs (and revenues) for the project. When comparing alternative solutions it is important to consider the costs and revenues associated with the project from the initial financial investment through the disposal of assets associated with the project. This interval between birth and death is the life cycle.
  • Estimates
    This lesson addresses the question on how individual cost estimates should be made. Since the methods of this course are used primarily for planning, the expenditures and receipts associated with capital and life-cycle costs are always estimates of future events.
  • Estimation with Risk
    This lesson introduces probability models for describing uncertain estimates. Estimates of a cash flow, where most of the amounts are realized in the future, always involve uncertainty or risk.
  • Project Cost with Risk
    This lesson uses probability theory and simulation for assessing the risks associated the capital cost of a project.


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

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