Development of a Fully Online Course in Engineering Economic Analysis

Session 3549 Development of a Fully Online Course in Engineering Economic Analysis Mukasa E. Ssemakula Division of Engineering Technology, Wayne State University, Detroit, MI 48202. Abstract A variety of social, economic and technological factors are converging to create increased demand for online and long distance education. This demand is in turn transforming how knowledge is delivered to students. New technologies are emerging to help address this need. From the instructor s perspective, this presents a challenge to keep abreast with the technologies and to adapt the nature and style of delivery of the course content itself to the new medium of delivery. This paper describes the process that was followed in transforming a traditional course in Engineering Economic Analysis, formerly delivered with the traditional chalk-and-board method, for delivery as an interactive fully online course. The issues discussed include the instructor s familiarization with the new technology, preparation of new course materials and visual aids, and incorporation of computer-based tools to enhance student understanding. The paper also discusses the administrative procedures that were put in place to ensure smooth running of the course and create a positive learning experience for students. 1. Introduction Enormous challenges face today's institutions of higher education, with a need to reduce costs, improve access, and cater to a changing population demographic. This societal change promises to have a profound impact on the traditional university. The responses to this challenge have been quite varied, including a wide range of approaches to distance education 1-3. This paper is not an attempt to evaluate the relative merits or otherwise of the various approaches, but rather focuses on experience with one approach - specifically, fully online distance education. The traditional approach to higher education involves a cohort of students coming together at a specified time and location in a formal classroom setting to meet with an instructor. Knowledge is transferred from the instructor to the students in a lecture format in which the students are mostly passive recipients of knowledge. The emergence of new educational technologies, especially online distance education, is seriously challenging this traditional model 4. In many cases, time, location or cost constraints on either the student or the educational institution (or both), mean that the traditional approach is not viable and alternative methods have to be applied. To reach non-traditional students more conveniently, our university has established a Page 9.429.1

number of extension centers where students can take a large number of classes without having to commute all the way to the main campus. This makes it more appealing to working adults because they can take classes close to their places of work or residence and minimize time lost to commuting. The university has also embraced various forms of distance education including interactive television (ITV) and web-based courses 5. The course described in this paper was adapted from a traditional chalk-and-blackboard course to a fully online course. It is imperative that if distance education tools are going to be used, the instructor designing and delivering the course be completely comfortable with the specific technology used. To help accomplish this, Wayne State University makes creation of distance education courses voluntary. Each department decides what courses or sections of courses it would like to offer via distance learning. Incentives for faculty to participate are also left to the department to decide. Our department offers release from one course for one semester to any faculty interested in developing a new distance course. When course delivery starts, the distance course counts as a regular course towards the teaching load. The university offers training programs to help interested faculty understand the basic mechanics of preparing and delivering distance-learning courses. To coordinate the efforts of faculty embracing the use of new technologies in the classroom, a university-wide Teaching and Learning Technology Roundtable (TLTR) has been formed as an advisory body to the Provost on issues pertaining to the use of new technologies in instruction. Among other things, the TLTR organizes an annual conference highlighting the accomplishments of faculty in this endeavor. 2. Course Description The course that is the subject of this paper is a typical semester-long course in Engineering Economic Analysis. The sole pre-requisite is a course in college algebra. The textbook we use for the course is Engineering Economy by Leland Blank and Anthony Tarquin; published by McGraw-Hill. The topical coverage is summarized in Table 1. Table 1: Course Content Week Topic 1 Introduction, Time Value of Money 2 Interest and Equivalence 3 Compounding periods, Series payments 4 Unusual Cash Flow Patterns 5 Present Worth Analysis 6 Annual Cash Flow Analysis 7 Rate of Return Analysis 8 Incremental Rate of Return Analysis 9 Benefit/Cost Ratio Analysis 10 Depreciation Methods 11 After-Tax Economic Analysis 12 Replacement and Retention 13 Effects of Inflation 14 Breakeven Analysis Page 9.429.2

The course is offered every semester because it is a required course in all the six programs offered in the department. It had been offered in the traditional chalk-and-board format until 2001 when we first added a section of the course offered as long-distance course using interactive television (ITV). Starting 2003, we added an online section in addition to the traditional and ITV sections. This paper focuses on our experiences with the online version of the course and how it compares with the traditional course offering. In future, we plan to simultaneously use all three modes of teaching the course and at that time, we will be able to make comparisons across the three modes. 3. Design of Instructional Materials Most students and instructors are used to the lecture format, which introduces important principles along with examples of applications, with the textbook serving to provide the details and reference material. An instructor can answer questions on the spot and change course if he senses the students are not grasping a particular point. If not carefully thought out and designed, everything that happens in the classroom would revolve around the instructor as the star of the show. In an online course however, the roles of both the instructor and the students necessarily have to change. Students do not have to follow a set schedule as in the traditional format and therefore they have to be much more proactive in acquiring knowledge. The instructor becomes more of a coach with students taking more control of how and when they engage in course activities. Recognizing this, learning materials should be designed to capture and retain the interest of students who might access the materials at very different times. It is imperative that the students should remain actively engaged with the learning materials. The successful online course, like any distance education course, should be a multimedia presentation including a mix of the following characteristics: Active involvement by all students Multiple presentation media to help engage and retain student interest Animations and simulations where appropriate Actual physical models of reasonable size if possible Multiple examples of practical applications These principles were implemented in several of the author s courses as reported elsewhere 5,6. This paper discusses how these ideas have been implemented in our fully online course in Engineering Economic Analysis. Being an online course, computer-based instructional tools were necessarily used. The challenge was to use these tools in a way that would be engaging for the students and enhance their learning. In this case, the primary delivery tools were PowerPoint, and Excel. PowerPoint s animation capabilities proved to be of great value as they allowed the instructor to present procedural steps in problem analysis and solution in a succinct yet fully engaging manner. Advantage was also taken of Excel s built-in financial analysis functions to build interactive simulations that allowed the students to explore and experiment with the fundamental concepts in Engineering Economic Analysis. This helps students to build confidence in their understanding of the relevant topics. Consider for example the fundamental concept of Time Value of Money (TVM). TVM expresses the inherent value (or worth) of money relative to different reference points in time. The interest Page 9.429.3

rate is the relationship through which the values are linked. Cash flows occurring at different points in time should never be compared directly without taking into account the interest relating them. Excel s financial analysis functions were used to build the simple simulation shown in Table 2. This simulation was embedded into the PowerPoint slides with students having the ability to change the values of principal and/or interest rate on the fly in a fully interactive way. The simulation automatically shows the corresponding future value after one period (year). By playing around with this simulation, students start to grasp the meaning of TVM. Table 2: Simulating Time Value of Money Principal Interest rate Future Value $100.00 12.00% $112.00 The above simulation only gives future value after one period. When multiple periods are considered, then the issue of simple and compound interest comes into play. To help students appreciate the difference in future values that occurs due to the two different approaches, the Excel-based simulation shown in Table 3 was built. As before, this was embedded into PowerPoint and the students have the ability to change the values of principal, interest rate or duration (# periods). The resulting future value for both simple interest and compound interest are given automatically. By playing around with different combinations of principal, interest and duration, students get a visual demonstration of the effects of compound interest. This is an example of taking advantage of the capability of the medium of teaching. Table 3: Simulating Simple and Compound Interest Principal Interest rate # Periods Future Value Future Value Simple Compound $1,000.00 5% 5 $1,250.00 $1,276.28 An important issue that arises when dealing with compound interest is the frequency of compounding. This leads to the concepts of nominal and effective interest rate. Again, Excel s financial analysis tools were used to build the simulation shown in Table 3. This shows the relationship between nominal interest rate, effective rate per compounding period (CP), and effective annual rate. On changing the value(s) of nominal rate and/or compounding frequency, the resulting effective rates are shown automatically by the computer. Table 4: Simulating Effects of Compounding Frequency Nominal Rate Compounding Effective Rate Effective Rate (r%) Frequency (m) (per CP) i% (annual) i a % 8.00% 12 0.6667% 8.3000% Simulations like the ones described here cannot be so easily accomplished in a traditional classroom. But since online courses presume the students have the use of computers, these Page 9.429.4

computer-based tools become an important means of enhancing student learning and they have been taken advantage of in this course. In addition to its simulation capabilities, Excel s computational power was also used extensively both for straight instruction, and to help demonstrate solution procedures. Consider for example the issue of determining the internal rate of return (IRR) on an investment. The IRR is defined as the interest rate for which the Net Present Worth (NPW) of a project is zero. When done by hand, determining the IRR value is a tedious task requiring an iterative computation of NPW values at different interest rates until an interest rate is found for which the NPW value is zero. Excel can be easily set up to do the relevant calculations internally and simply show the resulting value of IRR. Convenient as this is however, it is not an effective approach to teaching the concept of IRR since the students would not get to see the iterative computations underlying the computer solution. That obscures the conceptual meaning of IRR. In this course, this was addressed by taking advantage of Excel s versatility and displaying the results from intermediate steps in the problem solution, instead of just giving the final answer. Excel s graphical capabilities were then exploited to make the point even more dramatically by plotting all the intermediate results on a graph. This helps the student to visualize the variation in NPW values as the interest rate used for analysis is changed. The interest rate resulting in a zero value for NPW is determined from the graph by noting where the curve crosses the zero line. Figure 1 shows how Excel was used to demonstrate this process for a problem resulting in multiple solutions. The corresponding spreadsheet was embedded into a PowerPoint slide allowing the students to see the solution process for themselves. MARR = 5% 10% 15% 20% 25% 30% 40% 50% Yr 0 4000 4000 4000 4000 4000 4000 4000 4000 Yr 1-1000 -1000-1000 -1000-1000 -1000-1000 -1000 Yr 2-16200 -16200-16200 -16200-16200 -16200-16200 -16200 Yr 3 13600 13600 13600 13600 13600 13600 13600 13600 NPW = $102 ($80) ($177) ($213) ($205) ($165) ($23) $163 IRR = 7.47% 41.35% Multiple IRR Values Present Worth $200 $150 $100 $50 $0 ($50) 0% 10% 20% 30% 40% 50% 60% ($100) ($150) ($200) ($250) Interest Rate Figure 1: Demonstrating Multiple IRR Values Using Excel As Figure 1 shows, Excel allowed the instructor or student to modify parameters on the fly, to investigate how answers are affected when pertinent problem parameters are changed. This use Page 9.429.5

of Excel was easily integrated into the online course because the use of the computer during the course is presumed. All the other Excel spreadsheets, animations, and simulations used in the course were stored on the course web site for students to retrieve and review later at their leisure. Using computer animations and simulations is very helpful in making important concepts easy for the students to understand. It is particularly helpful in case of problems requiring multi-step solutions. Figure 2 shows a slide with an animation of a multi-step problem solution. Figure 2: A Multi-Step Problem Solution Figure 2 shows the PowerPoint slide that was used to illustrate the determination of the present value of a time-shifted uniform series. This is one of those concepts that is difficult to explain clearly on the blackboard (traditional classroom) or on paper (textbook). By stepping through the problem solution using a PowerPoint animation however, the students in a computer-based or online course such as the one described here get to understand more plainly the individual steps of the problem solution and how these steps relate to one another. For the example in Figure 2, the blue corresponds to the first stage of the solution and the orange corresponds to the second stage. The dashed lines show the relationships between the cash flows at each stage of the solution, and the functional relations at the bottom indicate how the actual solution is obtained. 4. Technical Support For the course discussed here, we have used various levels of logistical and technical support to ensure smooth running of the course. The course under discussion was delivered completely online using Blackboard, which the university has adopted as its standard web-based course delivery system. Students are required to appear in person for an initial meeting at the start of the semester, where the logistics of the course are explained and any issues with using the technology are handled. All course content and assignments were delivered online and students submitted their materials the same way. Students review the course content at their leisure. They pick up and submit their homework online, and the graded homework is returned online as well. The only exception is the final examination for which the students are required to appear in person. Students are also able to carry out online discussions between themselves as well as with Page 9.429.6

the instructor. Over time, this helps create a sense of community among diverse students. Technical support for the students is available at two levels. For basic issues concerned with utilization of Blackboard, the instructor is the first point of contact. Given the instructor s familiarity with the system, he was able to answer practically all the questions that the students had. The university s central technical support staff is available to handle any issues that the instructor may be unable to and to ensure the day-to-day operation of the system. 5. Discussion Developing and delivering this online course was indeed an interesting experience. It was especially interesting because the course was delivered simultaneously with a traditional course that was also taught by the same instructor. This created the opportunity to compare directly the performance of students in the two sections against each other. This was also a way of evaluating how good the online course offering was. The cohorts of students in the two sections were comparable since they were all drawn from the same pool of students who were already enrolled in our regular programs. The rate of attrition was the first notable point of comparison. In the traditional section, the attrition rate (students who started but never finished the course) was 14.3% while in the online section, the attrition rate was 21.4%. This is in line with other observations that attrition rates tend to be higher with online courses. When it came to actual performance however, the results were much more consistent between the two sections. Figure 3 shows the performance on a total of 9 identical homework assignments given to the two course sections during the semester. Homework Performance Campus Section Online Section 120.0 100.0 80.0 60.0 40.0 20.0 0.0 HW1 HW2 HW3 HW4 HW5 HW6 HW7 HW8 HW9 HW Mean Figure 3: Homework Performance Comparison The homework was done under similar conditions with the students given one week to complete each assignment. The online students had the additional chore of typing up their solutions for online submission. As Figure 3 shows, there was no significant difference in performance except for the last homework. The last homework was given towards the end of the semester and it is Page 9.429.7

likely that the on-campus students who tend to be enrolled in more courses at a time, were facing additional pressures due to multiple assignments from several courses coming due at the same time. The performance on the tests was also compared. Again, as shown in Figure 4, it was found that the results were pretty comparable. Test Performance Campus Section Online Section 100.0 80.0 60.0 40.0 20.0 0.0 T1 T2 TF Test Mean Overall Mean Figure 4: Test Performance Comparison The comparable performance in the tests was particularly interesting. As a personal philosophy, I do not give multiple-choice tests because I like to see the method of solution used in arriving at the answer and in fact I factor the method into the grading. This however leads to an issue of how to proctor the examinations for the online students. I decided on having the students appear in person for the final examination, but for them, I treated the mid-semester tests as take-home tests. The students had a specified time window within which to download the tests, solve the problems, type the solutions on the computer, and submit them back to Blackboard. Despite this, there was no appreciable difference in performance. All the tests were identical for both sections. I speculate that this is largely attributable to my other philosophy of regularly using open-book tests even for in-class tests. There is much less motivation to cheat when the notes and textbook are readily available to the student during the test. Of course I structure my tests in such a way that answers cannot simply be copied from the notes or textbook. And my insistence on a clearly laid-out solution procedure also places a high premium on understanding what one is doing which would not come out as readily in a copied solution. It is not a perfect answer but it worked well in this case. 6. Conclusion The experience gained in adapting this course for delivery as an online course was quite valuable. The nature of the materials used in the classroom had to be adapted to meet the needs of distance education. The move to a largely computer based delivery made possible the use of slides, handouts and animations in a manner that had not been tried before in this course and students were able to learn more effectively as a result. In particular, the use of the Blackboard Page 9.429.8

web-based course delivery system proved beneficial for both the instructor and the students. The student performance throughout the semester, on homework assignments as well as tests showed that the students in the online course performed comparably to those in the traditional course. This gives us confidence in our continuing drive to diversify the modes of course offerings we use and we expect to expand these efforts. One area that remains to be addressed is the somewhat higher attrition rates for students in the online courses. 7. References 1. Duderstadt, J., "Transforming the University to Serve the Digital Age," Cause/Effect, Vol. 20, No. 4, Winter 1997-98, PP 21-32. URL: http://www.educause.edu/ir/library/html/cem9745.html 2. Lenzner, R. and Johnson, S.S., "Seeing Things as They Really Are," Forbes, March 10, 1997. URL http://www.forbes.com/forbes/97/0310/5905122a.htm 3. Daniel, J.S., "Mega-Universities and Knowledge Media: Technology Strategies for Higher Education," London, Kogan Page, 1998. 4. Daniel, J., "Survival of Higher Education: Using New Technologies," Loma Linda University Annual Education Conference, May 14, 1998. URL http://www.open.ac.uk/vcs-speeches/lomalinda.html 5. Ssemakula, M.E.: 'Transforming a Traditional Course into a Long Distance Course.' 1999 Frontiers in Education Conference, Nov. 10-13, 1999, San Juan, Puerto Rico. 6. Ssemakula, M.E.: Development of a Web-Enhanced Live Interactive Television Course. Proceedings of the 2003 ASEE Annual Conference & Exposition, June 2003, Nashville, Tennessee. Biographical Sketch MUKASA E. SSEMAKULA graduated from the University of Manchester Institute of Science and Technology, UK, with a Ph.D. in Mechanical Engineering in 1984. He joined the Wayne State University in 1993 and is currently teaching courses in Manufacturing/Industrial Engineering Technology. He has research interests and has published widely in the areas of Manufacturing Systems and Computer Aided/Distance Education. Page 9.429.9