Engineering Economic Analysis Case Study 1 – Material for Chapters 1 to 4

Engineering Economic Analysis

Case Study 1 – Material for Chapters 1 to 4

The following ad is from a 1985 Rome Georgia newspaper. It describes a different loan, the Alternative Auto Loan, which reduces monthly payments and “allows” people to buy a more expensive car than a conventional loan payment would allow. 

You will notice that in 1985, auto loan interest was tax deductible. We will ignore that aspect of the loan program in this analysis.

In addition to the material provided in the Guidelines for Case Studies, be sure to answer these questions as you prepare your report:

1.       Show how all the monthly payments were computed by the bank. This should be computed and illustrated in Excel, using clearly labeled columns and rows.

2.       Suppose that you have decided to finance a new car for 36 months from Trust Company. Suppose also that you are interested in owning the car (not leasing it). If you decided to go with the Alternative Auto Loan, you would make the final payment and keep the car at the end of 36 months. Assume that your opportunity cost rate (personal interest rate) is an interest rate of 8% com­pounded monthly. (You may view this opportunity cost rate as an interest rate at which you can invest your money in some financial instrument, such as a savings account.  And if you can get an 8% interest rate on a savings account, please let me know!) Compare Trust Company’s alternative option with the conventional option and make a choice between them. Note that there are several assumptions you will need to make to answer this question, so clearly document them.

Engineering Economic Analysis

Case Study Report Guidelines

For each case study, a formal, typed report OR PowerPoint is to be turned in by each student.

Be aware that grammar and professionalism are integral to your report.  You might come up with the best solution ever in the history of the world, but it has to be expressed properly and clearly.

Report guidelines

Reports should be typed and at most 1.5 spaced, in Times New Roman 10 or 12 point font, with 1 inch margins on all sides.  BE SURE TO INCLUDE YOUR NAME IN THE HEADER / FIRST PAGE OF YOUR REPORT!!!!!

Reports will be graded on organization, style, and grammar as well as content.

Your report should sufficiently document the case, your approach, and your conclusions such that one year from now you (or I) could pick it up, read it, and easily understand your work.

The body of the report (text exclusive of graphs, charts, and appendices) should be no more than 5 pages in length, and brevity is appreciated. 

PowerPoint Guidelines

PowerPoints should be professional!  BE SURE TO INCLUDE YOUR NAME IN THE FIRST SLIDE OF YOUR POWERPOINT!!!!!

PowerPoints will be graded on organization, style, and grammar as well as content.

Your report should sufficiently document the case, your approach, and your conclusions such that one year from now you (or I) could pick it up, read it, and easily understand your work.

The body of the PowerPoint (inclusive of graphs, charts; not inclusive of appendices) should be no more than 20 slides in length, and brevity is appreciated. 

Content of report / PowerPoint

The following sub-sections should be included or addressed in some fashion:

Overview of the Case

Problem Statement

Your interpretation of the situation including explicit consideration of any necessary assumptions

Solution Methodology

Overall approach as well as a discussion of engineering economy principles utilized

Recommendations and Conclusions

Be specific and discuss sensitivities

Include the answers to any specific questions here

Make extensive use of graphs and charts as appropriate.

You may use any Excel tools you deem appropriate in analyzing the case. If you use Excel, you must submit the Excel file generated.  It will be graded on correctness, organization, and style.