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Fundamentals of Engineering Economics 3rd Edition by Chan Park
Edition 3ISBN: 978-0132775427Fundamentals of Engineering Economics 3rd Edition by Chan Park
Edition 3ISBN: 978-0132775427 Exercise 2
By reading any business publication give examples that illustrate one of the four fundamental principles of engineering economics.
Explanation
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Illustration of fundamental principles of engineering economics:
Principle 1:
• Company S estimated the cost of building a bridge was $2.4 million in 2011 and it increased to $5million in 2014.
• Bank C offered 10 year saving policy where a deposit on today will double after 10 years.
This offer of bank C and estimation of company S states one of the fundamental principles of engineering economics that an earlier dollar is worth more than a later dollar.
Principle 2:
• Company H launched a new printing machine with low price. The printing quality of this machine is better than many other printers. But the processor of the printer is very slow.
The new launch of company H states one of the fundamental principles of engineering economics that is all that counts is the difference among alternatives.
Principle 3:
• Company NC acquired company MC last year. Now marginal revenue of company NC is $2million. Whereas, marginal cost is less than $1.5 million.
The above example states one of the fundamental principles of engineering economics that is marginal revenue must exceed marginal cost.
Principle 4:
• Bank ZC has opened a new office in New York zone. Since there is number of well-established bank in this zone, many analyst feels it is a risky decision. However, CEO of the bank is confident that the bank has implemented some new policy to attract customer, which will help the bank to survive in this region.
The above example states one of the fundamental principles of engineering economics that is additional risk is not taken without expected additional return.
Principle 1:
• Company S estimated the cost of building a bridge was $2.4 million in 2011 and it increased to $5million in 2014.
• Bank C offered 10 year saving policy where a deposit on today will double after 10 years.
This offer of bank C and estimation of company S states one of the fundamental principles of engineering economics that an earlier dollar is worth more than a later dollar.
Principle 2:
• Company H launched a new printing machine with low price. The printing quality of this machine is better than many other printers. But the processor of the printer is very slow.
The new launch of company H states one of the fundamental principles of engineering economics that is all that counts is the difference among alternatives.
Principle 3:
• Company NC acquired company MC last year. Now marginal revenue of company NC is $2million. Whereas, marginal cost is less than $1.5 million.
The above example states one of the fundamental principles of engineering economics that is marginal revenue must exceed marginal cost.
Principle 4:
• Bank ZC has opened a new office in New York zone. Since there is number of well-established bank in this zone, many analyst feels it is a risky decision. However, CEO of the bank is confident that the bank has implemented some new policy to attract customer, which will help the bank to survive in this region.
The above example states one of the fundamental principles of engineering economics that is additional risk is not taken without expected additional return.
Fundamentals of Engineering Economics 3rd Edition by Chan Park
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