Gerald J. Thuesen

Applications of Dynamic Investment Criteria for Capital Budgeting Decisions

ABSTRACT Cardinal utility concepts are utilized in the development of three investment decision criteria that dynamically reflect changes in the economic health of the firm. Numerical examples are presented of the application of these criteria to a process where investment decisions are made in a sequential, periodic manner. The results of testing these criteria with more traditional criteria through simulation are discussed.

Teaching engineering economy in the context of design

Engineering economy is a subset of engineering that involves the application of technical and economic analysis, with the goal of deciding which course of action best meets performance criteria and simultaneously uses scarce capital in a prudent manner. The impact of engineering economy principles on an organization is maximized when introduced early in the process of designing a product, process or system. Here, the authors describe how coursework is being developed at the Georgia Institute of Technology and Virginia Polytechnic Institute and State University (USA) to introduce students to fundamental engineering economy subjects (e.g. statics/dynamics, thermodynamics, electromechanical systems and engineering economy) through the framework of design. It is hoped that sophomores and juniors will be drawn to an increased understanding of these important topics because of the realistic and exciting challenges of engineering design.

Dynamic Investment Criteria for Capital Budgeting Decisions

ABSTRACT Decision criteria are described chat can dynamicly respond to changes in the investment environment. The changes of primary concern reflect the ability of the firm to sustain financial losses. It is demonstrated that these dynamic decision criteria can be easily modified to quantitatively reflect the firms attitude toward uncertainty and wealth accumulation in addition Co its concern about possible bankruptcy. Based on the conventional Ideas of utility theory, these criteria are designed to be applied on a sequential basis Co investment alternatives described by probabilistic outcomes.

The Effectiveness of Using Uncertainty Resolution to Measure Investment Flexibility in Sequential Capital Rationing

Abstract The manner in which the uncertainty associated with a prospective investment is resolved over the investments life is an important consideration in judging the desirability of that investment. This paper presents a method for incorporating the idea of uncertainty resolution regarding an investments flexibility with the traditional measures of investment worth, profitability and variability. The resulting investment criterion is a single index that is referred to as the Project Balance Criterion. To test the effectiveness of this new criterion for probabilistic cash flows, the Project Balance Criterion is compared to the traditional Mean-Variance criterion for a sequential decision process. This comparison is made for a number of different investment settings. In addition, the improvement in project selection that is possible when future cash flows are certain is contrasted with the results of applying the Project Balance Criterion to probabilistic cash flows.

A FIFTY-YEAR EDITORIAL HISTORY OF THE ENGINEERING ECONOMIST

Abstract

DESIGN AND ECONOMICS IN THE ENGINEERING CORE CURRICULUM

ABSTRACT The engineering core curriculum typically represents those engineering science courses that are commonly taken by most engineering undergraduates. This project is intended to investigate whether improved learning is realized when students are taught engineering science Tram a design perspective. The design perspective requires that students understand how the ultimate product or service must achieve its engineering objective while satisfying certain economic goals

Statistical analysis of students' performance in new engineering science core courses with economic and design concepts

This paper presents the results of statistical analysis conducted on the data collected from a four-year project funded by National Science Foundation. The primary objective of this multi-year, project involving five institutions was to determine the performance of the engineering students in a core of four integrated engineering science courses featuring advanced design and economic content.

A Dynamic Target-Wealth Criterion for Capital Investment Decisions

ABSTRACT A dynamic decision criterion for the sequential budgeting process is developed. Through the use of utility functions, this decision criterion models a decision makers preferences for sequences of wealth positions generated by a set of investment opportunities relative to targeted wealth positions developed by the firm. The derivation of this criterion is related to cash flow analysis and the use of sequences of total wealth accumulations. Target-wealth utility functions are presented along with the motivation for their application to investment decision problems.