Engineering Economic Analysis

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After Completing ThisChapter...

The student should be able to:

·Use a range of estimated variables to evaluate a project.

· Describe possible outcomes with probability distributions.

·Combine probability distributions for individual variables into joint probability

distributions.

· Use expected values for economic decision making.

·Useeconomicdecisiontreesto describeand solvemorecomplexproblems.

·Measure and consider risk when making economic decisions.

· Understand how simulation can be used to evaluate economic decisions.

QUESTIONS TO CONSIDER ~

1.How can a company quantify the risk of an event such as discovery of TCE on its

property?

2. What are some ways a. company might estimate the cost of such an event,.should .it
   occur?


3. Prior to the mid-1970s,it was common (and legal) for manufacturersto landfillchemicals
   and other potentially hazardous materials. When Superfund was adopted in 1980, i~
   required companies that had disposed of these materials to clean up the landfill sites,
   even if disposal had taken place years before, at a time when the practice was not against
   the law. How can companies anticipate and prepare for future laws that might penalize
   activitieswhich are legal today,but may become illegal (or at least sociallyunacceptable)
   in the future?

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