Abstract

Economic evaluation is the quantitative estimate of expected venture profitability, often in comparison with other choices, including the competition. It is part of the analysis that supports the decision-making task in engineering and management. For essential parts of such an evaluation are problem definition, cost estimatiomn, revenue estimation, and profitability analysis, as well as a characterisation of the uncertainity and risk. The methodology associated with each part is summarised. A highlight is the development of the net rectum rate (NRR) as the logical profitability—a profit rate in which the cost of capital has been separarted out. This profit rate is illustrated for a typical production venture and advantages over historical profitability criteria are discussed.