ENGR 3970/ET5970 Project Assignment – Due Sunday November 18, 2018
This project involves data collection & analysis which should be fun and enables you to use your knowledge from class for practical application. This project will help illustrate the principle that “you learn by doing” and will help you link Engineering Economics knowledge to real life planning for your life following graduation.
Project description: We all know that we cannot plan for every possible event in our future. However, for the purpose of this project you are going to develop an experimental plan for the first 10 years of your life following graduation. How things really happen in the future may or may not work out as planned, but at least you can think about this as an interesting real-world application of Engineering Economy. The first part of the project involves simply documenting year by year events that you think have a reasonable probability of occurrence in your life. For example, at year 0 (immediately following graduation), perhaps you will enter the engineering workforce or maybe you are thinking of delaying entry into the engineering workforce by a few years to join the Peace Corps. Are you thinking of additional graduate school later while working? Many engineers decide to obtain additional education in their field or at least attend short courses in particular areas from time to time to stay current. Do you plan to buy a house? How often will you buy a car? What about a car for the kids? What about a vacation home or a boat? How many children will you have and when? Do you anticipate caring for an elderly relative? There are many, many questions to think about over the next 10 years. You can be creative – this is not meant to be a hard and fast plan. For the purpose of financial calculations, you need to be as realistic as possible. Estimates of salary increases, including big jumps when completing additional education can be obtained from the library and the internet.
Additional requirements: Each project must be neatly typed and include a cover sheet that at a minimum contains your name and the project assignment. The ability to communicate is a very important part of the project. Your report should include a concise and clear definition of all events in your project on a year by year basis over 10 years. One paragraph per year should be sufficient to provide this information. You should include a short bibliography with references. You should also list and briefly describe assumptions you have made for interest rates, tax, regular raises, etc. Use MS Excel for financial data organization, year by year, and of course, for the computations. After all the data has been entered, you will need to compute net present value (NPV) for your plan and discuss what conclusion(s) you have reached as a result of the exercise. For the purpose of this project, use Total cash flow:
Xo = (G-C) – (G-C-Dt)T – K + L
Xo = After tax total cash flow; G = Gross income; C = Costs of goods sold; Dt = Tax depreciation; T = Tax rate; K = Capital investment (Total Out of Pocket Spending for Purchasing Capital such as Cars, Houses, etc. ; L = Salvage value
The money you earn from your planned job(s) or investments will be treated as your expected gross revenues (G). Other expenses treated as Cost (C).
Assume you liquidate all your assets at the end of 10 years for the purpos