Engineering Economics

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ESD.70J / 1.145J Engineering Economy Module
Fall 2009

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ESD.70J Engineering Economy
Fall 2009
Session Zero
Michel-Alexandre Cardin
Prof. Richard de Neufville

ESD.70J Engineering Economy Module - Session 0

1

Class outline
1. Objective: get you up to speed for
Session 1!





Excel versions and languages
Excel basics for ESD.70
Few tricks to speed up analysis
More learning material

ESD.70J Engineering Economy Module - Session 0

2

Excel versions
• Versions currently “in use”
– PC: 2000, XP or 2003, 2007
– Mac: 2004, 2008
– Open source: Open Office Calc (see website)

• Many, many languages
– Chinese, English, French, Japanese, Spanish…
– Obviously cannot support all (see website for
handy tips in French and Spanish)
ESD.70J Engineering Economy Module - Session 0

3

Recommended versions
• Class supported in Excel 2007 for PC, and Excel
2004 for Mac
• Why?
– Excel 2007 widely used on PC
– Excel 2008 for Mac does not support Solver and other
functionalities required for class

• Make sure you have one of those installed!
• Ask your department for a free copy of software
ESD.70J Engineering Economy Module - Session 0

4

Course Materials


Excel spreadsheets
– ESD70session# –1.xls : setup before the class
– ESD70session# –2.xls : reflects all the work done
in class
– Do the exercises with me
the only way to learn


Cells marked as

are for you to fill

– Refer to the ESD70session# –2.xls to validate your
work



Lecture in PDF on course website

ESD.70J Engineering Economy Module - Session 0

5

Excel basics

Open ESD70session0-1.xls

ESD.70J Engineering Economy Module - Session 0

6

Excel basics
• Entering numbers and formulas
• Working with multiple sheets
• Manual vs. automatic calculations

ESD.70J Engineering Economy Module - Session 0

7

Big vs. Small setup













Building a computer plant
Deterministic demand projections for years 1, 2 and 3 are 300,000, 600,000, and 900,000 respectively
No sales in year 4 or thereafter
Plan A – a big plant; Plan B – one small plant each year; Plants take a few months to construct
Big plant capacity of 900,000 with capital cost of $900 million Each small plant capacity of 300,000 with capital cost of $300 million No salvage value for Plan A; $300 million salvage value for Plan B Discount rate for Plan A is 9%, and 8% for Plan B

The company will sell each computer for $2,000
Variable cost for Plan A is $1,280 due to economies of scale; Variable cost for Plan B is $1,500
See “Entries” Worksheet…

ESD.70J Engineering Economy Module - Session 0

8

Entering numbers and formulas
• Click on ‘Entries’ tab
– Fill in yellow cells as per case assumptions
– E.g. enter “9%” in cell D3, “8%” in cell D4

• Click on ‘Plan A’ tab
– Fill in yellow cells, guided by comments
– Referencing fields across sheets (and files)
– E.g. enter “1” in cell E3, “=Entries!D14*'Plan A'!E3” in cell E4
ESD.70J Engineering Economy Module - Session 0

9

Manual vs. automatic calculations
• How to set it up
– Mac: Excel ⇒ Preference ⇒ Calculations
– PC: Excel ⇒ Excel options ⇒ Formulas

• Shortcuts
– “F9” on PC and “command” = on Mac

ESD.70J Engineering Economy Module - Session 0

10

Few more Excel tricks…
• Copy and paste, paste special
• Entering Series
– Down…

• Cell formatting
• Charts primer
• ‘$’ fixed cell references
– Shortcuts “F4” on PC and “command
T” on Mac
ESD.70J Engineering Economy Module - Session 0

11

More learning material
• Excel 2004 for Mac:
http://web.mit.edu/macardin/Public/docsESD70/
DiscoveringMicrosoftOffice2004.pdf
• Excel 2007 for PC:
http://office.microsoft.com/enus/training/HA102255331033.aspx

ESD.70J Engineering Economy Module -...
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