Economic Decision Making Part 1

Northeastern University via Coursera

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Provider

Coursera
Pricing

Paid Course
Languages

English
Certificate

Paid Certificate Available
Duration & workload

18 hours 35 minutes
Sessions

On-Demand
Level

Intermediate
Subtitles

English

Found in

Overview

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Explores economic modeling and analysis techniques for selecting alternatives from potential solutions to an engineering problem. Considers measures of merit, such as present worth, annual worth, rate of return, and benefit/cost techniques. Examines recent techniques of economic analysis, especially the tools of decision-making. Explores decisions under uncertainty. Studies the causes of risk and uncertainty and examines ways to change and influence the degree of risk and uncertainty through sensitivity analysis, expectation-variance criterion, decision tree analysis, statistical decision techniques, and multiple attribute decision-making through group case studies.

Syllabus

Introduction to Time Value of Money (TVOM)

In Module 1, you'll discover why money isn't just a number—it's a vector with both magnitude and timing that fundamentally shapes every economic decision you'll make in your career. Through the powerful SEAT framework and ten guiding principles, you'll learn to systematically analyze decisions ranging from personal choices like buying versus leasing a car to billion-dollar public infrastructure projects. By understanding that a dollar today is mathematically different from a dollar tomorrow, you'll gain the analytical foundation needed to evaluate any investment opportunity, avoid common decision-making pitfalls like the sunk cost fallacy, and make choices that create real economic value in both your professional and personal life.

TVOM: Basic Calculus of Cash Flow

In Module 2, you'll transition from conceptual understanding to practical mastery of time value of money calculations, learning why a dollar today is mathematically different from a dollar tomorrow—and exactly how to quantify that difference. You'll discover that while everyone in practice uses Excel for financial calculations, understanding the underlying equations is what separates analysts who can catch million-dollar errors from those who blindly trust their spreadsheets. Through hands-on examples and clever tools like the Rule of 72, you'll build the mathematical intuition and computational skills needed to confidently analyze investment opportunities, compare alternatives across time, and make sound financial decisions in your engineering management career.

TVOM: Compounding Frequencies and Cash Flow Series

Most engineering projects don't involve simple one-time payments—they generate steady annual costs, linearly escalating maintenance expenses, or revenues that grow with inflation. This week, you'll master three essential cash flow patterns (uniform, gradient, and geometric series) and learn how multiple compounding periods within a year dramatically affect the true cost of financing, transforming your ability to analyze realistic scenarios like monthly mortgage payments, equipment leases with daily interest compounding, and maintenance contracts that escalate predictably over time.

Borrowing, Lending, and Investing

This module explores the financial mechanics of borrowing, lending, and wealth building through the lens of time value of money. You'll master the analysis of loan structures, decode mortgage options, and discover why the financial decisions you make today—whether taking on debt or building investments—will compound dramatically over your lifetime.

Bonds

Bonds represent one of the world's largest financial markets—rivaling the entire US stock market at tens of trillions of dollars—yet many professionals don't fully understand how they work. This module demystifies bonds as both financing tools and investment vehicles, teaching you the quantitative skills to evaluate bond purchases, calculate yields, and make informed corporate financing decisions. Whether you're considering issuing bonds to fund a major project, evaluating investment options for company reserves, or managing your personal portfolio, you'll master the time-value-of-money calculations that drive real-world bond decisions.

Establishing the Planning Horizon & MARR

This module tackles two fundamental questions that frame every engineering economic decision: "Over what timeframe should we evaluate our options?" and "What return threshold makes an investment worthwhile?" You'll discover how choosing different planning horizons can completely reverse investment rankings, and learn why your company's weighted average cost of capital establishes the floor for acceptable returns. Master these concepts, and you'll understand why two engineers analyzing the same equipment purchase can reach opposite conclusions—and more importantly, how to determine which analysis approach is correct.

Incremental Methods and Rate of Return Analysis IRR, ERR

This week challenges you to think beyond simple rankings by asking a more strategic question: "Is spending more money actually worth it?" You'll learn to evaluate whether incremental investments generate sufficient returns using Internal Rate of Return (IRR) and External Rate of Return (ERR)—powerful tools that help you justify capital decisions and communicate financial recommendations in the language of "percent return" that resonates with executives and stakeholders.