Cost analysis and estimating for engineering and management ch11

Cost Analysis and Estimating for Engineering and Management Chapter 11 The Enterprise Entrepreneurship And “Imaginamachina” © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-1 Overview  The Business of New Ideas Entrepreneurship  Designing for Profit Top Down Cost Targets  Designing for Manufacture  Financing the Enterprise  Legal and Ethical Issues © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-2 Changes  Starting a New Business  Big Changes to Existing Business  Less Than 1% of New Products Succeed  Only 2% of Patented Ideas Develop  Competition is Intense  Need Good Business Planning and Funding, Along with a Good Idea © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-3 The Enterprise © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-4 Free Enterprise  Producers Make What They Want (Or Not) Charge What They Want Compete How They Want  Customers Buy What They Want (Or Not) Buy From Whom They Want © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-5 Business  Motivated By Profit  Players Include Owners Employees Customers  Cannot Succeed By Maintaining the “Status Quo” © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-6 Launching a Product © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-7 Marketing Identifies a Demand for a Product  Creates a Demand for a New Product  New Technologies Emerge and Grow  Innovation Growth Standardization Maturity  Need Differing Marketing Approaches © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-8 Entrepreneurship  Entrepreneurs Supply the Ideas Have a Long Term Vision Are Flexible and Adaptable  Successful Companies Must Continually Add New Products Connect Entrepreneurs with Funding © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-9 Design for Profit  Top Down Estimate Starts with a Market Price Ends with “Target Costs”  Ensures: Product Meets Market Price Production Can Meet Cost Targets Profit  Determines Feasibility (Proceed or Kill) © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-10 Entrepreneur’s Challenge  Must Understand the Project and Plan Completely  Consider and Address Potential Questions  Thoroughly Review the Plan  Be Able to Answer Any and All Questions © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-24 Funding the Enterprise Personal Resources  Existing Company Resources  Private Investors  Public Funding  Stocks Bonds Debt (Loans) Alliances © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-25 Stocks  Small Units of Ownership  Stock Price Appreciation (Share of Growth)  Dividends (Share of Profits)  No Guarantees May Loose Investment © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-26 Stock Terms  Market Capitalization Share Price x Number of Shares  Price Earnings Ratio Stock Price  per Share Earnings  Preferred Stock Specified Dividend Rate Preference Over Common Stock © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-27 Debt (Loans)  Specified Repayment Amounts and Times  Requires Interest Payments Credit Rating Affects Interest Rate Interest Is Tax Deductible Expense © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-28 Bonds  Stock Is Expensive and Continues Indefinitely  Bonds Are Limited Life  Borrowing from Investors  Fixed Income Stream (Interest)  Principal Repaid at End of Term © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-29 Bond Interest  Called Coupon Rate  Based on U.S Treasury 30-Year Bonds  Credit Rating Determines Margin  Margin Rate Above Treasury Rate  High Interest Rates Makes Capital Expensive © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-30 Bond Terms  Face Value (Par) Amount to Be Paid at Maturity  Coupon Rate Sets Magnitude of Interest Payments  Yield Coupon Rate  Price © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-31 Bond Values  Sale Price Is Approximately the Par Value  Present Value Sum of Remaining Interest Payments Plus the Amount Paid at Maturity All Discounted at a Required Interest Rate P0  I ( P / A, i b , n)  M ( P / F , i b , n) © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Eq 11.1 Ch 11-32 Bond Trading  Bonds Can Be Traded on the Market  Sales Price Depends on Current Interest Rates  Original Purchase Price Means Nothing  Higher Current Interest Rates Lower the Bond Price © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-33 Alliances  Joining with Another Company or Individual  Limited Partnership  Joint Venture  Venture Capital © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-34 Seeking Alliances  Offering Develop an Enterprise Plan Present to Interested Parties Assessment and Due Diligence Negotiation and Closing © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-35 Types of Enterprise  Sole Proprietorship  Partnership Any Partner Can Make Commitments for the Business  Corporation Legal Entity Limits Liability to Investment Only © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-36 Ethics and Engineering  Expectation of Highest Standards of Honesty and Integrity  Dedication to Protecting the Public  Maintain Objectivity in Fact Finding and Cost Analysis  Maintain Trust and Fairness © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-37 Summary  Entrepreneurship and the Enterprise  How to Design for Cost and Profit  How to Fund the Enterprise  Legal Structure of the Enterprise  Importance of Ethics © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-38 ... Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-7 Marketing Identifies a Demand for a Product  Creates a Demand for a New Product  New Technologies Emerge and. .. McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-15 Cost to Buy  In Addition to Quoted Price Transportation Costs Purchasing and Order Management Cost Receiving Costs... Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 11-22 Assessment Economic Evaluation Criteria for Enterprise Plans   Affordability and total cost Percent profit