ASSIGNMENT ON ENGINEERING ECONOMICS
AND MANAGEMENT
ACKNOWLEDGEMENT
I would like to express my sincere gratitude to our respected teacher for
giving me the opportunity to complete this assignment on Engineering
Economics and Management. This assignment helped me understand
concepts such as Time Value of Money, IRR, Evaluation of Engineering
Projects, Break-even Analysis, Market Structure, Law of Demand, Law of
Supply, Cost Analysis, Depreciation Analysis, and Commercial Banks.
I also thank everyone who directly or indirectly helped me complete this
assignment successfully.
STUDENT CERTIFICATE
This is to certify that this assignment titled “Engineering Economics and
Management” submitted by ____________________ of
____________________ semester, Branch ____________________, Odisha
University of Technology and Research (OUTR), Bhubaneswar, is a
bonafide work carried out for academic purposes.
1. TIME VALUE OF MONEY
The Time Value of Money (TVM) states that money available today is more
valuable than the same amount received in the future because it can earn
interest. TVM is widely used in engineering economics, investments, and
business planning.
Future Value Formula:
FV = PV(1+i)^n
Present Value Formula:
PV = FV/(1+i)^n
Applications:
• Loan calculations
• Project evaluation
• Investment planning
• Retirement planning
2. INTERNAL RATE OF RETURN (IRR)
IRR is the discount rate at which the Net Present Value (NPV) of a project
becomes zero. It is used to evaluate the profitability of investments and
engineering projects.
Decision Rule:
• IRR > Cost of Capital → Accept project
• IRR < Cost of Capital → Reject project
Advantages:
• Considers time value of money
• Useful for comparing projects
Limitations:
• Complex calculations
• May provide multiple IRR values
3. EVALUATION OF ENGINEERING PROJECTS
Engineering project evaluation determines the technical and economic
feasibility of projects before implementation.
Methods:
• Payback Period
• Net Present Value
• Internal Rate of Return
• Benefit-Cost Ratio
Importance:
• Reduces financial risk
• Helps select profitable projects
• Ensures proper use of resources
4. BREAK-EVEN ANALYSIS
Break-even analysis determines the point where total revenue equals total
cost.
Break-even Point Formula:
BEP = Fixed Cost / (Selling Price – Variable Cost)
Advantages:
• Helps determine minimum sales
• Useful for pricing decisions
• Assists in profit planning
5. MARKET STRUCTURE
Market structure refers to the characteristics of a market that influence
competition and pricing.
Types:
• Perfect Competition
• Monopoly
• Monopolistic Competition
• Oligopoly
Importance:
• Determines pricing strategies
• Influences profit and competition
6. LAW OF DEMAND
The law of demand states that when price increases, demand decreases, and
vice versa, keeping other factors constant.
Reasons:
• Diminishing marginal utility
• Income effect
• Substitution effect
Exceptions:
• Giffen goods
• Prestige goods
7. LAW OF SUPPLY
The law of supply states that when price increases, supply also increases,
keeping other factors constant.
Factors Affecting Supply:
• Cost of production
• Technology
• Government policy
• Number of sellers
8. COST ANALYSIS
Cost analysis evaluates different costs involved in production and
operations.
Types of Costs:
• Fixed cost
• Variable cost
• Direct cost
• Indirect cost
Importance:
• Helps in budgeting
• Controls expenses
• Improves efficiency
9. DEPRECIATION ANALYSIS
Depreciation is the reduction in value of an asset over time due to wear and
tear.
Straight Line Formula:
Depreciation = (Cost of Asset – Scrap Value) / Useful Life
Importance:
• Determines true profit
• Helps in taxation
• Assists in replacement planning
10. COMMERCIAL BANKS
Commercial banks accept deposits and provide loans and financial services.
Functions:
• Accepting deposits
• Providing loans
• Credit creation
• Online banking services
Importance:
• Encourages savings
• Supports industries
• Promotes economic growth
CONCLUSION
Engineering economics and management concepts help engineers and
businesses make proper financial and economic decisions. Knowledge of
demand, supply, cost analysis, project evaluation, and banking systems is
highly important in modern industries.
BIBLIOGRAPHY
1. Engineering Economics by R. Panneerselvam
2. Engineering Economy by William G. Sullivan
3. Principles of Economics by N. Gregory Mankiw
4. Financial Management by I.M. Pandey
5. Class Notes and Study Materials