Course Details

Course Information Package

Course Unit CodeMEM502
Course Unit DetailsMSc Engineering Management (Electives Courses) -
Number of ECTS credits allocated7
Learning Outcomes of the course unitBy the end of the course, the students should be able to:
  1. Apply alternative costing methodologies and show their management implications.
  2. Propose Plans, and examine budgetary control accountability and responsibility for financial performance.
  3. Appraise engineering project proposals by applying Present worth analysis; or Annual worth analysis; or Rate of return analysis.
  4. Apply methods of investigating project risk: sensitivity analysis, break-even analysis.
  5. Apply commercial software to model and develop an actual project’s cash flow reports and calculate NPV and IRR.
  6. Calculate risk and return for individual assets and portfolios in the mean-variance framework and explain risk and required return calculations based on the Capital Asset Pricing Model (CAPM)
  7. Explain the effect the sources of financing on the value of projects and the firm and calculate present value of projects involving various sources of financing.
  8. Apply sensitivity and scenario analysis in project appraisal and solve simple real options problems involving managerial flexibility under uncertainty.
Mode of DeliveryFace-to-face
Recommended optional program componentsNONE
Course Contents Introduction to Business Finance
-  Understanding Financial statements
-  Profit vs. Cash control of cash flow and its implications
-  Interpretation of Accounts
-  Costing Techniques to ascertain, recover and control costs
-  Marginal Costing and Contribution Analysis
-  Absorption and Activity Based Costing
-  Evaluating Business and Engineering Assets:
        -  Present-Worth Analysis
        -  Rate of Return Analysis
-  Project Cash Flow Analysis
        -  Project Cost Elements
        -  Project cash flow activities
        -  Effect of inflation
-  Mean-variance optimization and efficient frontiers
-  Cost of Capital and the capital asset pricing model (CAPM)
-  Project financing
        -  Debt versus equity
        -  Cost of capital with different sources of financing
        -  Capital budgeting with different sources of financing
-  Handling Project Cash Flow Risk
        - Methods of describing Risk (Sensitivity Analysis, Scenario Analysis)
        - Including Risk in Investment evaluation (Probabilistic approach)
        - Investment strategies under Uncertainty (Real Options)
Laboratory work
-  Rate of Return Analysis: Use Microsoft Excel to formulate investment decisions and evaluate their rate of return.
-  Project Cash Flow Analysis: Use Microsoft Excel to structure Project Cash Flows and estimate their Rate of Return.
-  Mean-variance optimization in Microsoft Excel and construction of efficient frontiers 
-  Project Uncertainty: Use Microsoft Excel to conduct sensitivity analysis and scenario evaluation of particular projects’ cash flows.
-  Use Microsoft Excel to build scenario trees for investment decisions under uncertainty and valuation of options
-  Investigate realistic case studies’ feasibility using Microsoft Excel to set up the problem and conduct sensitivity analysis to examine alternative scenarios. 
-  The students are expected to read and review 4-5 papers from relevant scientific and business journals.

Recommended and/or required reading:
  • Fundamentals of engineering Economics, by Park Chan, Prentice Hall, 2nd edition 2009.
  • Engineering Economy , by William Sullivan, Elin Wicks, and Patrick Koelling, 14th edition, 2009
  • Principles of Corporate Finance, 9th edition, by Brealey A. R., Myers C. S. I
  • Park Chan, Fundamentals of Engineering Economics, Prentice Hall, 2004
  • Financial Theory and Corporate Policy, by Copeland T. E., Weston J. F., Shastri K.4th edition
  • Park Chan, Contemporary Engineering Economics, Prentice Hall, 3rd Edition, 2002
  • Stephen A. Ross, Randolph W Westerfield, Bradford D Jordan, Fundamentals of Corporate Finance Alternate Edition + S&P card + Student CD, McGraw-Hill 7th Edition, 2006
  • James C. Van Horne, John M Wachowicz, Fundamentals of Financial Management, 12/E, Prentice Hall 12th Edition 2005
Planned learning activities and teaching methods The taught part of course is delivered to the students by means of lectures, conducted with the help of computer presentations. Lecture notes and presentations are available through the web for students to use in combination with the textbooks.
Lectures are supplemented with coursework and laboratory work carried out on Microsoft Excel. During laboratory sessions, students learn Engineering Economy functions at Microsoft Excel and develop simple Project Cash flow applications to evaluate critical parameters such as Net Present Worth or Internal Rate of Return of a proposed engineering investment.
The course material (notes, exercises, forum, etc) is maintained on the university’s e-learning platform

Assessment methods and criteria
Individual or small group exercises 20%
Final Exam50%
Language of instructionEnglish
Work placement(s)NO

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