Technical Economic Analysis

Course Description

ETI 3671 — Technical Economic Analysis is a 3-credit upper-division course in the Engineering Technologies / Industrial Systems Technology taxonomy of Florida's Statewide Course Numbering System (SCNS). The course provides students with the skills to formulate, develop, and apply analytical techniques to reach cost-effective solutions to business, government, and/or engineering-related problems. Students learn to evaluate capital investments, compare engineering alternatives, and make data-driven economic decisions using quantitative methods drawn from the discipline of engineering economy. This course is offered at multiple Florida institutions including Seminole State College, Daytona State College, and the University of Central Florida.

Learning Outcomes

Required Learning Outcomes

Upon successful completion of this course, students will be able to:

• Apply the principles of time value of money to evaluate single and multiple cash flows over time.
• Calculate present worth (PW), annual worth (AW), and future worth (FW) of engineering and business alternatives.
• Determine the internal rate of return (IRR) and the external rate of return (ERR) for proposed investments.
• Compare mutually exclusive alternatives using appropriate economic decision criteria.
• Apply depreciation methods (straight-line, MACRS, declining balance) to capital assets.
• Perform benefit-cost analysis (BCA) for public-sector and government projects.
• Analyze the effects of inflation and price changes on economic decisions.
• Conduct breakeven analysis and identify cost-minimizing operating points.

Optional Learning Outcomes

Depending on institutional emphasis, students may also be able to:

• Perform sensitivity and risk analysis to assess the impact of uncertainty on economic decisions.
• Apply replacement analysis to determine when aging assets should be retired or replaced.
• Use spreadsheet tools (e.g., Microsoft Excel) to automate engineering economy calculations.
• Incorporate after-tax analysis and income tax considerations into project evaluations.
• Evaluate capital financing options, including loans, bonds, and leasing.
• Apply economic analysis methods to lean manufacturing or industrial systems improvement projects.

Major Topics

Required Topics

1. Foundations of Engineering Economy — Role of economic analysis in engineering decisions; cash flow diagrams; interest and interest rates; simple vs. compound interest.
2. Time Value of Money — Single-payment and uniform-series compound interest factors; arithmetic and geometric gradients; equivalence calculations.
3. Present Worth Analysis — PW of alternatives with equal and unequal lives; capitalized cost for long-life projects.
4. Annual Worth Analysis — Capital recovery costs; AW comparison of alternatives over study periods.
5. Rate of Return Analysis — IRR calculation and interpretation; incremental rate of return for mutually exclusive alternatives.
6. Benefit-Cost Analysis — B/C ratio methodology; public-sector project evaluation; incremental B/C analysis.
7. Depreciation Methods — Straight-line, declining balance, sum-of-years-digits, and MACRS (Modified Accelerated Cost Recovery System).
8. Breakeven and Payback Analysis — Breakeven point determination; simple and discounted payback period calculations.
9. Effects of Inflation — Real vs. actual dollars; inflation-adjusted interest rates; analysis in inflationary environments.

Optional Topics

1. Sensitivity Analysis — Spider plots; varying single and multiple parameters to measure decision robustness.
2. Risk and Probability in Economic Decisions — Expected value analysis; Monte Carlo simulation concepts; decision trees.
3. Replacement Analysis — Defender-challenger framework; economic service life; marginal cost analysis.
4. After-Tax Economic Analysis — Federal income tax effects; after-tax cash flow; MACRS interaction with taxes.
5. Capital Financing — Debt vs. equity financing; WACC (weighted average cost of capital); bonds and loans.
6. Spreadsheet Modeling — Excel NPV/IRR functions; goal seek and data tables for sensitivity studies.
7. Lean and Process Improvement Economics — Cost justification of industrial improvement projects; ROI for automation and quality initiatives.

Resources & Tools

• Primary Textbook: Engineering Economy by Blank & Tarquin (McGraw-Hill) — the most widely adopted text for this course type across Florida institutions.
• Alternate Text: Engineering Economic Analysis by Newnan, Eschenbach & Lavelle (Oxford University Press).
• Software: Microsoft Excel (NPV, IRR, PMT, and FV functions); optional: MATLAB or engineering economy calculator apps.
• Interest Factor Tables: Standard compound interest tables (typically provided in textbook appendices).
• Florida SCNS Reference: flscns.fldoe.org — statewide course profile and transfer equivalency information.

Career Pathways

Completion of ETI 3671 supports career advancement in roles where capital investment decisions and cost analysis are essential. Relevant career pathways include:

• Industrial Engineer — Cost justification of process improvements, equipment procurement, and facility investments.
• Manufacturing / Operations Manager — Evaluating capital expenditures, make-vs.-buy decisions, and lifecycle costs.
• Project Engineer / Project Manager — Economic feasibility studies; ROI and NPV reporting for project approval.
• Cost Analyst / Estimator — Defense, construction, and manufacturing sectors require formal economic analysis skills.
• Government / Public Works Engineer — Benefit-cost analysis for infrastructure and public-sector programs.
• Supply Chain Analyst — Total cost of ownership modeling; vendor and sourcing economic comparisons.

Special Information

This course is positioned as an upper-division (3000-level) course within the Engineering Technologies / Industrial Systems Technology taxonomy and is appropriate for students pursuing a Bachelor of Applied Science (BAS) or Bachelor of Science in Technology (BST) degree at Florida colleges and universities.

• Content is directly aligned with economic analysis competencies tested on the FE (Fundamentals of Engineering) Exam administered by NCEES, specifically the Engineering Economics section.
• Students seeking Certified Manufacturing Engineer (CMfgE) or Certified Industrial Engineer credentials will find this course provides foundational economic knowledge required for those certifications.
• The course may satisfy economics or quantitative methods requirements within industrial technology and technology management degree programs.
• Per the Florida SCNS, this course (ETI 3671) transfers equivalently to institutions participating in the statewide articulation system, including UCF, Daytona State College, and Seminole State College.