Conference Session

Frontiers in Engineering Economy

Collection

2009 Annual Conference & Exposition

Authors

Philip Brach, University of the District of Columbia; Ahmet Zeytinci, University of the District of Columbia; Pradeep Behera, University of the District of Columbia

Tagged Divisions

Engineering Economy

topic couldbe assistance in alleviating the current home-mortgage difficulties.In essence the proposed study includes three major components: 1- A new concept of cost to be charged for home mortgages. 2- Establishment of the term of a mortgage loan by tying it to the individual’s ability to pay. 3- A proposal to permit the deduction of rent from federal income tax for the purpose of assisting in the accumulation of a down payment for the purchase of a home mortgage.The students will be involved in evaluating this proposal through qualitative and quantitativemethods in their analysis of the impact of such a policy on the current and future fiscal health ofthe nation.The content of this paper will not be without controversy. But it

Conference Session

Frontiers in Engineering Economy

Collection

2009 Annual Conference & Exposition

Authors

Robert Lundquist, Ohio State University

Tagged Divisions

Engineering Economy

the asset must be determined. Next therecovery period is used to determine the correct column in the MACRS percentage table.Finally the percentage from that table corresponding to the recovery year of interest ismultiplied by the basis of the asset to find the amount of the depreciation for that year.1. HistoryBefore ACRS the IRS published guidelines for acceptable asset lives for tax purposescalled Asset Depreciation Ranges or ADRs. The depreciation method could be chosenfrom any of the commonly used accounting methods, straight line, sum of years digitsand declining balance using 150%, 175% and 200%. In most cases the company waspermitted to switch one time from any of these methods to any other. Salvage valueswere also somewhat arbitrary

Conference Session

Frontiers in Engineering Economy

Collection

2009 Annual Conference & Exposition

Authors

Neal Lewis, University of Bridgeport; Ted Eschenbach, TGE Consulting; Joseph Hartman, University of Florida

Tagged Divisions

Engineering Economy

benefitsand the costs are needed in order to calculate the option value. In the last few years, theliterature has had several examples where authors use multiple interest rates and differentcompounding assumptions for calculating present values. For example, “first” costs are almostalways discounted using a continuous risk-free interest rate while later cash flows are oftendiscounted using discrete market interest rates.This paper focuses on the compounding assumptions. Two approaches are used: (1) Real optionarticles in Harvard Business Review, Journal of Finance, and The Engineering Economist aresurveyed over matching periods to determine typical practices; and (2) A realistic delay optionexample is analyzed. The goal is to determine whether

Conference Session

Advances in Engineering Economy Pedagogy

Collection

2009 Annual Conference & Exposition

Authors

Jane Fraser, Colorado State University, Pueblo; Ray Tsai, Taiwan

Tagged Divisions

Engineering Economy

. Page 14.782.1© American Society for Engineering Education, 2009 Interesting Different Decision ProblemsIntroductionConsider a choice among three used cars based upon three criteria, miles, price, and year. Year isused as a proxy for other features, such as an adjustable seat and so forth, that have been addedto cars over time. The three cars have the following values on the criteria: Criterion miles price year 1 45K $8K 2000 Car 2 100K $9K 1995 3 60K $10K 1998 Figure 1

Conference Session

Advances in Engineering Economy Pedagogy

Collection

2009 Annual Conference & Exposition

Authors

Abhijit Gosavi, Missouri University of Science and Technology

Tagged Divisions

Engineering Economy

will be discussed. 1. IntroductionRevenue management is a newly emerging topic in engineeringmanagement, business management, and operations research that is beingtaught as an elective in business schools of numerous universities in the USand Europe (Columbia University and Northwestern University in the USand INSEAD in Europe to name a few). Revenue management is arelatively new topic in operations research. It was born in the 1970s out ofthe pioneering work of Littlewood4. It was loosely associated with a bunchof techniques used by airlines to intelligently price their seats. However, itwas in the mid-eighties that it gradually developed into a science. In thosedays, it was called “yield management.” American Airlines played a

Conference Session

Advances in Engineering Economy Pedagogy

Collection

2009 Annual Conference & Exposition

Authors

John Ristroph, University of Louisiana, Lafayette

Tagged Divisions

Engineering Economy

improvement.FactorsA hundred years ago, tables were used to provide the values of interest formulas that were diffi-cult to evaluate using slide rules. The slide rules have disappeared, but not the tables. At first,tables seem to be a convenience, but they require spending valuable classroom time to teach themechanics of factors. For example, consider the problem shown in Figure 1. Given deposits of$3,000 at times 2, 3, …, 30, what equal amounts can be withdrawn at times 39, 40, …, 63? Thisis a three-step problem using factors. 1. Determine the equivalent (i.e., the account E30 E38 balance) at time 30: 3,000 E30 = 3,000(F|A, i, 30-1) (1