Engineering Economics — Spring 2026¶

Course Overview¶

Engineering Economics is the discipline that lets engineers and software professionals make defensible money decisions — the kind that survive an auditor, a board review, or a CFO who has never written a line of code. Across fifteen lectures we move from the fundamentals of how money changes value over time, through the analytical toolkit (cash-flow analysis, NPV/IRR, break-even, sensitivity, decision trees), into the software-specific extensions (LOC and Function Points, COCOMO II, quality and maintenance economics, Build/Buy/Reuse, VBSE), and finally into the two AI-era topics that are reshaping cost estimation in 2026: productivity disruption and token-cost engineering.

The course is deliberately quantitative. Every lecture contains worked numerical examples, every problem set requires students to compute and justify a number, and every discussion segment grounds the math in a real-world decision a practising engineer might face this semester.

Learning Outcomes¶

By the end of the course, students will be able to:

• Convert between present, future, and uniform-series cash flows at any compounding frequency.
• Choose among NPV, IRR, payback, and PI as a function of decision context, capital constraints, and stakeholder audience.
• Quantify break-even points and run single- and multi-variable sensitivity analyses on engineering proposals.
• Decompose project risk using decision trees, expected value, and Monte Carlo simulation.
• Estimate software size using LOC, IFPUG Function Points, and Use-Case Points; estimate effort and schedule with COCOMO II.
• Reason about quality, maintenance, and technical-debt cost over the lifecycle of a software system.
• Defend a Build vs. Buy vs. Reuse vs. SaaS recommendation in stakeholder-value terms.
• Model the unit economics of an AI feature: token cost, agent-call multipliers, cache hit rates, and project ROI.

Lecture Schedule¶

How to Use the Web Decks¶

Each lecture deck is a single-file Reveal.js 5 build that renders in any modern browser — no slide software required.

• Open the deck link to enter presentation mode.
• Press S to open speaker view (pacing notes, board-work prompts, sanity-check tricks).
• Press F to enter full-screen.
• Press Esc to see the slide overview grid.
• Press B to black out the screen during a discussion segment.

Decks include LaTeX rendered with MathJax, inline SVG cash-flow diagrams, and an in-class discussion segment per lecture with solo / pair / plenary timing.

Reading & Reference¶

The course leans on three standard references and does not require a single textbook:

• Park, C.S. Contemporary Engineering Economics (6e). Pearson. — Chapters 2–9 cover the TVM, equivalence, NPV/IRR, and risk material.
• Boehm, B. et al. Software Cost Estimation with COCOMO II. Prentice Hall. — Required for Lectures 8–9.
• Boehm, B. & Sullivan, K. Value-Based Software Engineering. Springer. — Required for Lecture 11.

Selected papers (Brooks, No Silver Bullet; Boehm 1981; Cusumano 2024; OpenAI/Anthropic pricing papers, 2025) are linked from individual lecture pages.