Summary and Learning Objectives

The construction of a new airport terminal in a small town was recently completed and the airport management has hired you to compare the economic worth of a set of candidate investment options via rate of return analysis.

After successful completion of this Immersive Simulation-Based Learning (I-SBL) module, the student will be able to:

1. Collect data from the real-world system under study and estimate the cash flows needed for the economic analysis.
2. Compute the internal rate of return (IRR) for an investment option.
3. Perform rate of return (ROR) analysis to compare multiple alternatives and select the most economical option.
4. Perform present worth (PW) analysis to compare multiple alternatives and select the most economical option.
5. Verify the ROR and PW analyses by comparing the outcomes of the two methods.

Keywords

Engineering economy, internal rate of return, rate of return analysis, present worth analysis, airport terminal

Discipline(s):

Industrial Engineering; Engineering Management; Systems Engineering; Management Science; General Engineering and Business

Potential related courses/topics

Engineering Economy; Management Science; Decision Making

Recommended educational level and audience

Undergraduate; Graduate; Introductory, nonmajors or majors

Prerequisites

Familiarity with rate of return analysis and basic math.

Necessary student resources

Textbook/handout: Incremental analysis framework.  Formulas for IRR and PW calculation.

Software/hardware: A computer with Simio installed on it.

Immersion level

The module supports both “low-immersion” (3D view on a typical display) and “high-immersion” (virtual reality using an Oculus Rift VR headset).

Can it be used as a traditional PBL module without the immersive simulation model?

Yes, but not directly. Students need to estimate certain parameters by collecting data from the simulation model.  The questions can be answered without having access to the immersive simulation model if these parameters are provided in the problem statement.  The simulation is intended to serve as the “context” to help students visualize and interact with the system under study.

Recommended time frame and activity format

Total time: 30 minutes (Part 1: 10 minutes; Part 2: 20 minutes)

Can be done as in-class activity or homework assignment.

Can be done in groups or individually.

Download module material (problem description and immersive simulation model)

Students:
Problem description
Simulation model (Simio file) – Desktop Version – Low Immersion
Simulation model (Simio file) – Virtual Reality Version – High Immersion

Instructors: Click here to request access to instructor copy.