VILLANOVA UNIVERSITY

CEE 4701: Economy and Risk                                                   Fall 2000

Instructor: Dr. R.A. Chadderton

Office: 142 Tolentine

Course Description: "Value theory, engineering economy, interest formulas, equivalence
calculations, inflation and taxes, comparison among alternatives, decision criteria, cost
estimation, decisions under risk...."

Prerequisites: "Probability in Civil Engineering Design"

Required Texts: (a) Thuesen & Fabrycky; Engineering Economy, 9th ed.
                (b) Williams; Do the Right Thing. (vii-183)
                (c) selected readings (distributed in class);
                    not shown in Assignments.



Topic 1: Introduction to engineering economy, course description,
         subjective value judgments, time preference.

      Reading: (a) Ch. 1
      Questions: (a) 2,3,5,6,12,13,15,19.

Topic 2: Economic and Cost Concepts.

      Reading: (a) Ch. 2
      Questions: (a) 1,5,7,9,11,14,16,17,22,26.

Topic 3: (b) “Race & Sex”

Topic 4: Interest Formula Derivations and Verifications.

      Reading: (a) Ch. 3:1-3
      Problems: (a)4,9,10-15(part a, only),21a.

Topic 5: More interest formulas and relationships.

      Reading: (a) Ch. 3:4-7.

           Problems: (a) 35a, 36a, 41a, 42c, 44c, 50a.

Topic 6: Equivalence and its calculation.

       Reading: (a) Ch. 4:1-4.
       Problems: (a) 1a,2a,3a,4a,13a,15,20a,26.

Topic 7: More on Equivalence.

       Reading: (a) Ch. 4:5-8.
       Problems: (a) 35, 41, 43, 64, 71(e).

Topic 8: (b) “Government”

Topic 9: Exam # 1: Chapters 1-4.

Topic 10: Inflation and Purchasing Power of Money.

      Reading: (a) Ch. 5:1-3.
      Problems: (a) 3a,4a,5a,7a, 15a, 20a, 26.

Topic 11: Inflation and rising prices.

      Reading: (a) Ch. 5: 4.
      Problems: (a) 31,39,41

Topic 12: (b) “Education”

Topic 13: Comparison of Alternatives: Present Worth,
       Annual Amount, Future Worth.

      Reading: (a) Ch. 6:1-4.
      Problems: (a) 3,10(a),10(b), 12, 18

Topic 14: More comparisons: Rate of Return, Payback
       Period, Project Balance.

      Reading: (a) Ch. 6:4-8.
      Problems: (a) 22(a), 29, 33, 40, 44.

Topic 15: (b) “Environment & Health”

Topic 16: Decisions among Alternatives: Types of proposals,
       Mutually-exclusive proposals, Decision criteria.

      Reading: (a) Ch. 7:1-3.

      Problems: (a) 5,9

Topic 17: Incremental Investment

      Reading: (a) Ch. 7:4-5.
      Problems: (a) 12,13.

Topic 18: Total Investment, alternatives with unequal lives.

      Reading: (a) Ch. 7:6-7.
      Problems: (a) 16, 39.

Topic 19: (b) “International”

Topic 20: Exam # 2: Chs. 5-7.

Topic 21: Break-Even Analysis

      Reading: (a) Ch. 8:2.
      Problems: (a) 13,16

Topic 22: Replacement analyses: sunk cost, economic life,
       foregone opportunities.

      Reading: (a) Ch. 9.
      Problems: (a) 2,6,15,18,20.

Topic 23: (b) “Law & Society”

Topic 24: Evaluation of “Public” Activities.

      Reading: (a) Ch. 10.
      Problems: (a) (1-8),16,17,18,19,24,27,31

Topic 25: Depreciation Methods.

      Reading: (a) Ch. 11:3-8.
      Problems: (a) 9,11,15,17,18,20,21,23,25,30,45.

Topic 26: Effects of Income Taxes; After-tax cash flows.

      Reading: (a) Ch. 12:1-6,9,10,11,12.
      Problems: (a) 3,4,11,18,19,22,27.

Topic 27: (b) “Potpourri”

Topic 28: Exam # 3: Ch. 8-12.

Topic 29: Decisions under Risk.

      Reading: (a) Ch. 15: 1,2.
      Problems: (a) 1,4,11.

Topic 30: Risk Assessment, Decision-tree analysis.

      Reading: Ch.15:5.1, 5.3.
      Problems: (a) 20(a), 22.

Topic 31: Recapitulation.

      Readings: (a), (b), & (c); comprehensively.

Topic, the last: FINAL EXAM - during exam period.


NOTE: The term “topic” implies that material coverage will not, necessarily, correspond to
individual class periods. Some topics may require more than one class period, others less.


COURSE BIBLIOGRAPHY. Handouts and literature cited in selected

   A student's grade will be based on the average of three, one-hour examinations given during
the course and a final examination given at the time scheduled for the final examination period.
The numerical averages required for specific letter grades will be as shown in the following

        Numerical Average       Letter Grade *

           95 - 100          A
           90 - 94           A-
           88 - 89           B+
           83 - 87           B
           80 - 82           B-
           78 - 79           C+
           74 - 77           C
           71 - 73           C-
           69 - 70           D+
           65 - 68           D
           61 - 64           D-
           00 - 60           F

  Hour exams will each count one unit; final exam will count two units.
  Students are expected to know what their grades are at all times. If there is any question on
grades, the instructor should be consulted.

* Note: The letter grade assigned for an associated numerical average may, in some instances,
be higher than the letter grade indicated in the table above. The letter grade assigned for an
associated numerical average will not be lower than the letter grade indicated in the table above.


   Attendance at regular class meetings is not required. However, in-class discussions constitute
a significant source of information; students are urged to attend class regularly. The instructor
will assume that all students are conversant with all materials mentioned in class.

   Examinations are administered during regular, scheduled class times. Therefore, attendance
at all examination periods is mandatory. If a student misses an examination period, any
arrangement for a so-called “makeup” exam will be at the discretion and convenience of the


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