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Uncertainty in Future Events engineering

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Running head: UNCERTAINTY IN FUTURE EVENTS 1
Uncertainty in Future Events
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UNCERTAINTY IN FUTURE EVENTS 2
Uncertainty in Future Events
The ability to forecast with high accuracy on future events is an important aspect of
engineering. However, even with the best estimates, it is impossible to guarantee a 100%
accuracy. Disruptive changes in technology, economy, and culture are usually bound to occur
and alter the manner that future events occur. Specifically, disruptive changes can lead to a loss
in value due to obsolescence, reduction in demand, or increase in operation cost (Sullivan,
Wicks, & Koelling, 2014). In light of this, engineering economic analysis assesses the long-term
consequences of projects while considering the time value of money.
Due to the inability to accurately foretell the future, engineers assess the cost and benefits
of assets by comparing various scenarios such as most optimistic, most pessimistic, and most
likely events that affect a product. They then give a weight to each scenario, which they later use
to estimate the future cost or benefit of an event. A break-even analysis is conducted to examine
the impact of the variability of estimates of the outcome (Newnan, Lavelle, & Eschenbach,
2013). It enables an engineer to estimate the amount of variability that a parameter may have
before an initial decision is affected. However, the breakeven analysis does not show how an
individual may take the inherent variability of parameters into account in an economic analysis
(Blank & Tarquin, 2013). It is important to note that the salvage value is the component that
mostly affects the differences between the economic alternatives. When different projects or
assets have an almost similar salvage value, their economic differences may be small. On the
contrary, a large difference in salvage values may make different projects to have huge economic
differences.
The three range of scenarios; optimistic, pessimistic, and most likely are useful in
determining the cost or benefits of an event. In a real-world scenario, an engineer is normally

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Running head: UNCERTAINTY IN FUTURE EVENTS Uncertainty in Future Events Student’s Name Institution Affiliation 1 UNCERTAINTY IN FUTURE EVENTS 2 Uncertainty in Future Events The ability to forecast with high accuracy on future events is an important aspect of engineering. However, even with the best estimates, it is impossible to guarantee a 100% accuracy. Disruptive changes in technology, economy, and culture are usually bound to occur and alter the manner that future events occur. Specifically, disruptive changes can lead to a loss in value due to obsolescence, reduction in demand, or increase in operation cost (Sullivan, Wicks, & Koelling, 2014). In light of this, engineering economic analysis assesses the long-term consequences of projects while considering the time value of money. Due to the inability to accurately foretell the future, engineers assess the cost and benefits of assets by comparing various scenarios such as most optimistic, most pessimistic, and most likely events that affect a product. They then give a weight to each scenario, which they later use to estimate the future cost or benefit of an event. A break-even analysis is conducted to examine the impact of the variability of estimates of the outcome (Newnan, Lavelle, & Eschenbach, 2013). It enables an engineer to estimate the amount of variability that a parameter may have before an initial decision is affected. However, the breakeven analysis does not show how an individual may take the inherent ...
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