ESD.70J Engineering Economy Module - Session 0 1ESD.70J Engineering EconomyFall 2010Session ZeroMichel-Alexandre Cardin – [email protected]. Richard de Neufville – [email protected] Engineering Economy Module - Session 0 2Class outline1. Objective: get you up to speed forSession 1!• Excel versions and languages• Excel basics for ESD.70• Few tricks to speed up analysis• More learning materialESD.70J Engineering Economy Module - Session 0 3Course websitehttp://ardent.mit.edu/real_options/ROcse_Excel_latest/Excel_Class.html• All files posted on the web– Ask to transfer files manually if you cannotconnectESD.70J Engineering Economy Module - Session 0 4Excel versions• Versions currently “in use”– PC: 2000, XP or 2003, 2007– Mac: 2004, 2008– Open source: Open Office Calc (see website)• Many, many languages– Chinese, English, French, Japanese, Spanish…– Obviously cannot support all (see website forhandy tips in French and Spanish)ESD.70J Engineering Economy Module - Session 0 5Recommended versions• Class supported in Excel 2007 for PC, and Excel2004 for Mac• Why?– Excel 2007 widely used on PC– Excel 2008 for Mac does not support Solver and otherfunctionalities required for class• Make sure you have one of those installed!• Ask your department for a free copy of softwareESD.70J Engineering Economy Module - Session 0 6Course Materials• Excel spreadsheets– ESD70session# –1.xls : setup before the class– ESD70session# –2.xls : reflects all the work donein class– Do the exercises with me the only way to learn• Cells marked as are for you to fill– Refer to the ESD70session# –2.xls to validate yourwork• Lecture in PDF on course websiteESD.70J Engineering Economy Module - Session 0 7Excel basicsOpen ESD70session0-1.xlsESD.70J Engineering Economy Module - Session 0 8Excel basics• Entering numbers and formulas• Working with multiple sheets• Manual vs. automatic calculationsESD.70J Engineering Economy Module - Session 0 9Big vs. Small setup• Building a computer plant• Deterministic demand projections for years 1, 2 and 3 are 300,000,600,000, and 900,000 respectively• No sales in year 4 or thereafter• Plan A – a big plant; Plan B – one small plant each year;• Plants take a few months to construct• Big plant capacity of 900,000 with capital cost of $900 million• Each small plant capacity of 300,000 with capital cost of $300 million• No salvage value for Plan A; $300 million salvage value for Plan B• Discount rate for Plan A is 9%, and 8% for Plan B• The company will sell each computer for $2,000• Variable cost for Plan A is $1,280 due to economies of scale;Variable cost for Plan B is $1,500• See “Entries” Worksheet…ESD.70J Engineering Economy Module - Session 0 10Entering numbers and formulas• Click on ‘Entries’ tab– Fill in yellow cells as per case assumptions– E.g. enter “9%” in cell D3, “8%” in cell D4• Click on ‘Plan A’ tab– Fill in yellow cells, guided by comments– Referencing fields across sheets (and files)– E.g. enter “1” in cell E3, “=Entries!D14*'Plan A'!E3”in cell E4ESD.70J Engineering Economy Module - Session 0 11Manual vs. automatic calculations• How to set it up– Mac: Excel ⇒ Preference ⇒ Calculations– PC: Excel ⇒ Excel options ⇒ Formulas• Shortcuts– “F9” on PC and “command =“ on MacESD.70J Engineering Economy Module - Session 0 12Few more Excel tricks…• Copy and paste, paste special• Entering Series– Down…• Cell formatting• Charts primer• ‘$’ fixed cell references– Shortcuts “F4” on PC and “commandT” on MacESD.70J Engineering Economy Module - Session 0 13More learning material• Excel 2004 for Mac:http://web.mit.edu/macardin/Public/docsESD70/DiscoveringMicrosoftOffice2004.pdf• Excel 2007 for PC:http://office.microsoft.com/en-us/training/HA102255331033.aspxESD.70J Engineering Economy Module - Session 0 14Next session…We begin the main session about NPV,Sensitivity Analysis and Data TablesTAKE A SHORT BREAK AND COMEBACK AT
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