7 Principles Of Engineering Economics With Examples (2026)

Suppose a company has $100,000 to invest in a new project. The company has two options: Option A, which yields a 15% return on investment (ROI), and Option B, which yields a 20% ROI. However, the company can only choose one option. The opportunity cost of choosing Option A is the 20% ROI that could have been earned by choosing Option B.

Benefit-cost analysis is a method used to evaluate the economic viability of a project or investment by comparing its benefits and costs. 7 principles of engineering economics with examples

\[ PV = rac{1200}{(1+0.10)^3} = 901.68 \] Suppose a company has $100,000 to invest in a new project

7 Principles of Engineering Economics with Examples** The opportunity cost of choosing Option A is

Suppose a company is considering a new project that involves building a new factory. The project has an estimated cost of \(1 million and is expected to generate annual benefits of \) 200,000 for 5 years. Using benefit-cost analysis, the present value of the benefits and costs can be calculated as:

\[ PV_B = rac{200,000}{(1+0.10)^1} + rac{200,000}{(1+0.10)^2} + ... + rac{200,000}{(1+0.10)^5} = 743,921 \]