Engineering Economy

Cover
Title
Copyright
Contents
Preface to Eighth Edition
LEARNING STAGE 1 THE FUNDAMENTALS
	Chapter 1 Foundations of Engineering Economy
		1.1 Why Engineering Economy and the Time Value of Money are Important
		1.2 Performing an Engineering Economy Study
		1.3 Professional Ethics and Economic Decisions
		1.4 Interest Rate and Rate of Return
		1.5 Terminology and Symbols
		1.6 Cash Flows: Estimation and Diagramming
		1.7 Economic Equivalence
		1.8 Simple and Compound Interest
		1.9 Minimum Attractive Rate of Return
		1.10 Introduction to Spreadsheet Use
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Cost of Electricity with Renewable Sources Added
	Chapter 2 Factors: How Time and Interest Affect Money
		PE: Progressive Example—The Steel Plant Case
		2.1 Single-Amount Factors (F/P and P/F )
		2.2 Uniform Series Present Worth Factor and Capital Recovery Factor (P/A and A/P)
		2.3 Sinking Fund Factor and Uniform Series Compound Amount Factor (A/F and F/A)
		2.4 Factor Values for Untabulated i or n Values
		2.5 Arithmetic Gradient Factors (P/G and A/G)
		2.6 Geometric Gradient Series Factors
		2.7 Determining i or n for Known Cash Flow Values
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—The Amazing Impact of Compound Interest
	Chapter 3 Combining Factors and Spreadsheet Functions
		3.1 Calculations for Uniform Series That Are Shifted
		3.2 Calculations Involving Uniform Series and Randomly Placed Single Amounts
		3.3 Calculations for Shifted Gradients
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Preserving Land for Public Use
	Chapter 4 Nominal and Effective Interest Rates
		PE: Progressive Example—The Credit Card Offer Case
		4.1 Nominal and Effective Interest Rate Statements
		4.2 Effective Annual Interest Rates
		4.3 Effective Interest Rates for Any Time Period
		4.4 Equivalence Relations: Payment Period and Compounding Period
		4.5 Equivalence Relations: Single Amounts with PP ≥ CP
		4.6 Equivalence Relations: Series with PP ≥ CP
		4.7 Equivalence Relations: Single Amounts and Series with PP < CP
		4.8 Effective Interest Rate for Continuous Compounding
		4.9 Interest Rates That Vary Over Time
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Is Owning a Home a Net Gain or Net Loss Over Time?
LEARNING STAGE 2 BASIC ANALYSIS TOOLS
	Chapter 5 Present Worth Analysis
		PE: Progressive Example—Water for Semiconductor Manufacturing Case
		5.1 Formulating Alternatives
		5.2 Present Worth Analysis of Equal-Life Alternatives
		5.3 Present Worth Analysis of Different-Life Alternatives
		5.4 Future Worth Analysis
		5.5 Capitalized Cost Analysis
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Comparing Social Security Benefits
	Chapter 6 Annual Worth Analysis
		6.1 Advantages and Uses of Annual Worth Analysis
		6.2 Calculation of Capital Recovery and AW Values
		6.3 Evaluating Alternatives by Annual Worth Analysis
		6.4 AW of a Permanent Investment
		6.5 Life-Cycle Cost Analysis
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Annual Worth Analysis—Then and Now
	Chapter 7 Rate of Return Analysis: One Project
		7.1 Interpretation of a Rate of Return Value
		7.2 Rate of Return Calculation Using a PW or AW Relation
		7.3 Special Considerations When Using the ROR Method
		7.4 Multiple Rate of Return Values
		7.5 Techniques to Remove Multiple Rates of Return
		7.6 Rate of Return of a Bond Investment
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Developing and Selling an Innovative Idea
	Chapter 8 Rate of Return Analysis: Multiple Alternatives
		8.1 Why Incremental Analysis Is Necessary
		8.2 Calculation of Incremental Cash Flows for ROR Analysis
		8.3 Interpretation of Rate of Return on the Extra Investment
		8.4 Rate of Return Evaluation Using PW: Incremental and Breakeven (Two Alternatives)
		8.5 Rate of Return Evaluation Using AW
		8.6 Incremental ROR Analysis of Multiple (More than Two) Alternatives
		8.7 All-in-One Spreadsheet Analysis
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Peforming ROR Analysis for 3D Printer and IIoT Technology
		Case Study—How a New Engineering Graduate Can Help His Father
	Chapter 9 Benefit/Cost Analysis and Public Sector Economics
		PE: Progressive Example—Water Treatment Facility #3 Case
		9.1 Public Sector Projects
		9.2 Benefit/Cost Analysis of a Single Project
		9.3 Incremental B/C Analysis (Two Alternatives)
		9.4 Incremental B/C Analysis of Multiple (More than Two) Alternatives
		9.5 Service Sector Projects and Cost-Effectiveness Analysis
		9.6 Ethical Considerations in the Public Sector
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Highway Lighting Options to Reduce Traffic Accidents
LEARNING STAGE 2 EPILOGUE: SELECTING THE BASIC ANALYSIS TOOL
LEARNING STAGE 3 MAKING BETTER DECISIONS
	Chapter 10 Project Financing and Noneconomic Attributes
		10.1 MARR Relation to the Cost of Capital
		10.2 Debt-Equity Mix and Weighted Average Cost of Capital
		10.3 Determination of the Cost of Debt Capital
		10.4 Determination of the Cost of Equity Capital and the MARR
		10.5 Effect of Debt-Equity Mix on Investment Risk
		10.6 Multiple Attribute Analysis: An Introduction
		10.7 Evaluation Measure for Multiple Attributes
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Expanding a Business—Debt vs. Equity Financing?
	Chapter 11 Replacement and Retention Decisions
		PE Progressive Example—Keep or Replace the Kiln Case
		11.1 Basics of a Replacement Study
		11.2 Economic Service Life
		11.3 Performing a Replacement Study
		11.4 Additional Considerations in a Replacement Study
		11.5 Replacement Study over a Specified Study Period
		11.6 Replacement Value
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—A Pumper System with an ESL Problem
	Chapter 12 Independent Projects with Budget Limitation
		12.1 An Overview of Capital Rationing among Projects
		12.2 Capital Rationing Using PW Analysis of Equal-Life Projects
		12.3 Capital Rationing Using PW Analysis of Unequal-Life Projects
		12.4 Capital Budgeting Problem Formulation Using Linear Programming
		12.5 Additional Project Ranking Measures
		Chapter Summary
		Problems
		Additional Problems and FE Exam Review Questions
	Chapter 13 Breakeven and Payback Analysis
		13.1 Breakeven Analysis for a Single Project
		13.2 Breakeven Analysis Between Two Alternatives
		13.3 Payback Analysis
		13.4 More Breakeven and Payback Analysis on Spreadsheets
		Chapter Summary
		Problems
		Exercises for Spreadsheets
		Additional Problems and FE Exam Review Questions
		Case Study—Water Treatment Plant Process Costs
LEARNING STAGE 4 ROUNDING OUT THE STUDY
	Chapter 14 Effects of Inflation
		14.1 Understanding the Impact of Inflation
		14.2 Present Worth Calculations Adjusted for Inflation
		14.3 Future Worth Calculations Adjusted for Inflation
		14.4 Capital Recovery Calculations Adjusted for Inflation
		Chapter Summary
		Problems
		Additional Problems and FE Exam Review Questions
		Case Study—Inflation Considerations for Stock and Bond Investments
	Chapter 15 Cost Estimation and Indirect Cost Allocation
		15.1 Understanding How Cost Estimation Is Accomplished
		15.2 Unit Method
		15.3 Cost Indexes
		15.4 Cost-Estimating Relationships: Cost-Capacity Equations
		15.5 Cost-Estimating Relationships: Factor Method
		15.6 Indirect Cost Rates and Allocation: The Traditional Method
		15.7 Activity-Based Costing (ABC) for Indirect Costs
		15.8 Making Estimates and Maintaining Ethical Practices
		Chapter Summary
		Problems
		Additional Problems and FE Exam Review Questions
		Case Study—Indirect Cost Analysis of Medical Equipment Manufacturing Costs
		Case Study—Deceptive Acts Can Get You in Trouble
	Chapter 16 Depreciation Methods
		16.1 Depreciation Terminology
		16.2 Straight Line (SL) Depreciation
		16.3 Declining Balance (DB) and Double Declining Balance (DDB) Depreciation
		16.4 Modified Accelerated Cost Recovery System (MACRS)
		16.5 Determining the MACRS Recovery Period
		16.6 Depletion Methods
			Chapter Summary
			Appendix
		16A.1 Sum-of-Years-Digits (SYD) and Unit-of-Production (UOP) Depreciation
		16A.2 Switching between Depreciation Methods
		16A.3 Determination of MACRS Rates
		Problems
		Additional Problems and FE Exam Review Questions
		Appendix Problems
	Chapter 17 After-Tax Economic Analysis
		17.1 Income Tax Terminology and Basic Relations
		17.2 Calculation of Cash Flow after Taxes
		17.3 Effect on Taxes of Different Depreciation Methods and Recovery Periods
		17.4 Depreciation Recapture and Capital Gains (Losses)
		17.5 After-Tax Economic Evaluation
		17.6 After-Tax Replacement Study
		17.7 After-Tax Value-Added Analysis
		17.8 After-Tax Analysis for International Projects
		17.9 Value-Added Tax
		Chapter Summary
		Problems
		Additional Problems and FE Exam Review Questions
		Case Study—After-Tax Analysis for Business Expansion
	Chapter 18 Sensitivity Analysis and Staged Decisions
		18.1 Determining Sensitivity to Parameter Variation
		18.2 Sensitivity Analysis Using Three Estimates
		18.3 Estimate Variability and the Expected Value
		18.4 Expected Value Computations for Alternatives
		18.5 Staged Evaluation of Alternatives Using a Decision Tree
		18.6 Real Options in Engineering Economics
		Chapter Summary
		Problems
		Additional Problems and FE Exam Review Questions
		Case Study—Sensitivity to the Economic Environment
		Case Study—Sensitivity Analysis of Public Sector Projects—Water Supply Plans
	Chapter 19 More on Variation and Decision Making under Risk
		19.1 Interpretation of Certainty, Risk, and Uncertainty
		19.2 Elements Important to Decision Making under Risk
		19.3 Random Samples
		19.4 Sample Estimates: Mean and Standard Deviation
		19.5 Monte Carlo Sampling and Simulation Analysis
		Chapter Summary
		Problems
		Additional Problems and FE Exam Review Questions
		Case Study—Using Simulation and Three-Estimate Sensitivity Analysis
Appendix A: Using Spreadsheets and Microsoft Excel®
	A.1 Introduction to Using Excel
	A.2 Organization (Layout) of the Spreadsheet
	A.3 Spreadsheet Functions Important to Engineering Economy (Alphabetical Order)
	A.4 Goal Seek—A Tool for Breakeven and Sensitivity Analysis
	A.5 Solver—An Optimizing Tool for Capital Budgeting, Breakeven, and Sensitivity Analysis
	A.6 Error Messages
Appendix B: Basics of Accounting Reports and Business Ratios
	B.1 The Balance Sheet
	B.2 Income Statement and Cost of Goods Sold Statement
	B.3 Business Ratios
Appendix C: Code of Ethics for Engineers
Appendix D: Alternate Methods for Equivalence Calculations
	D.1 Using Programmable Calculators
	D.2 Using the Summation of a Geometric Series
Appendix E: Glossary of Concepts and Terms
	E.1 Important Concepts and Guidelines
	E.2 Symbols and Terms
Reference Materials
Factor Tables
Index
	A
	B
	C
	D
	E
	F
	G
	H
	I
	L
	M
	N
	O
	P
	R
	S
	T
	U
	V
	W
	X
	Y