ABSTRACT
Engineering economic analysis directly relates to strategic decision-making and maximizing Total Manufacturing Assurance (TMA) return on investment (ROI). Financial analysis and budgeting are fundamentally the strategic plan in expressed in financial terms, which is also necessary for achieving organizational and TMA success. For all projects, engineering-based or other, evaluating alternatives involves identifying the most advantageous ROI time value for the money involved. Key decision-making issues commonly are (1) Initial Cost, (2) Interest Rate, (3) Annual Cost or Benefit, (4) Economic Life, (5) Salvage Value, and (6) After-Tax Cash Flow. An essential part of strategic planning is to develop a proforma of operations that will indicate whether or not the strategic plan is do-able within the current operating and financial structure. This provides an essential management tool to measuring actual financial performance. The investment decision matrix (IDM) is a structure tool for collecting relevant financial information to support strategic decision-making.
