Engineering Economy

Title
CONTENTS
Preface
Green Content
Abbreviations and Notation Summary
1. Introduction to Engineering Economy
	1.1 Introduction
	1.2 The Principles of Engineering Economy
	1.3 Engineering Economy and the Design Process
	1.4 Using Spreadsheets in Engineering Economic Analysis
	1.5 Try Your Skills
	1.6 Summary
	Problems
2. Cost Concepts and Design Economics
	2.1 Cost Terminology
	2.2 The General Economic Environment
	2.3 Cost-Driven Design Optimization
	2.4 Present Economy Studies
	2.5 CASE STUDY—The Economics of Daytime Running Lights
	2.6 In-Class Exercise
	2.7 Try Your Skills
	2.8 Summary
	Problems
	Spreadsheet Exercises
	Case Study Exercises
	FE Practice Problems
3. Cost-Estimation Techniques
	3.1 Introduction
	3.2 An Integrated Approach
	3.3 Selected Estimating Techniques (Models)
	3.4 Parametric Cost Estimating
	3.5 CASE STUDY—Demanufacturing of Computers
	3.6 Electronic Spreadsheet Modeling: Learning Curve
	3.7 In-Class Exercise
	3.8 Try Your Skills
	Problems
	Spreadsheet Exercises
	Case Study Exercises
	FE Practice Problems
4. The Time Value of Money
	4.1 Introduction
	4.2 Simple Interest
	4.3 Compound Interest
	4.4 The Concept of Equivalence
	4.5 Notation and Cash-Flow Diagrams and Tables
	4.6 Relating Present and Future Equivalent Values of Single Cash Flows
	4.7 Relating a Uniform Series (Annuity) to Its Presentand Future Equivalent Values
	4.8 Summary of Interest Formulas and Relationships for Discrete Compounding
	4.9 Deferred Annuities (Uniform Series)
	4.10 Equivalence Calculations Involving MultipleInterest Formulas
	4.11 Uniform (Arithmetic) Gradient of Cash Flows
	4.12 Geometric Sequences of Cash Flows
	4.13 Interest Rates that Vary with Time
	4.14 Nominal and Effective Interest Rates
	4.15 Compounding More Often than Once per Year
	4.16 Interest Formulas for Continuous Compounding and Discrete Cash Flows
	4.17 CASE STUDY—Understanding Economic “Equivalence”
	4.18 In-Class Exercise
	4.19 Try Your Skills
	4.20 Summary
	Problems
	Spreadsheet Exercises
	Case Study Exercises
	FE Practice Problems
5. Evaluating a Single Project
	5.1 Introduction
	5.2 Determining the Minimum Attractive Rateof Return (MARR)
	5.3 The Present Worth Method
	5.4 The Future Worth Method
	5.5 The Annual Worth Method
	5.6 The Internal Rate of Return Method
	5.7 The External Rate of Return Method†
	5.8 The Payback (Payout) Period Method
	5.9 CASE STUDY—A Proposed Capital Investment to Improve Process Yield
	5.10 Electronic Spreadsheet Modeling:Payback Period Method
	5.11 In-Class Exercise
	5.12 Try Your Skills
	5.13 Summary
	Problems
	Spreadsheet Exercises
	Case Study Exercises
	FE Practice Problems
	Appendix 5-A The Multiple Rate of Return Problemwith the IRR Method
	Appendix 5-A Problems
6. Comparison and Selection among Alternatives
	6.1 Introduction
	6.2 Basic Concepts for Comparing Alternatives
	6.3 The Study (Analysis) Period
	6.4 Useful Lives Are Equal to the Study Period
	6.5 Useful Lives Are Unequal among the Alternatives
	6.6 Personal Finances
	6.7 CASE STUDY−−Ned and Larry’s Ice Cream Company
	6.8 Postevaluation of Results
	6.9 Project Postevaluation Spreadsheet Approach
	6.10 In-Class Exercise
	6.11 Try Your Skills
	6.12 Summary
	Problems
	Spreadsheet Exercises
	Case Study Exercises
	FE Practice Problems
7. Depreciation and Income Taxes
	7.1 Introduction
	7.2 Depreciation Concepts and Terminology
	7.3 The Classical (Historical) Depreciation Methods
	7.4 The Modified Accelerated Cost Recovery System
	7.5 A Comprehensive Depreciation Example
	7.6 Introduction to Income Taxes
	7.7 The Effective (Marginal) Corporate Income Tax Rate
	7.8 Gain (Loss) on the Disposal of an Asset
	7.9 General Procedure for Making After-Tax Economic Analyses
	7.10 Illustration of Computations of ATCFs
	7.11 Economic Value Added
	7.12 In-Class Exercise
	7.13 Try Your Skills
	7.14 Summary
	Problems
	Spreadsheet Exercises
	FE Practice Problems
8. Price Changes and Exchange Rates
	8.1 Introduction
	8.2 Terminology and Basic Concepts
	8.3 Fixed and Responsive Annuities
	8.4 Differential Price Changes
	8.5 Spreadsheet Application
	8.6 Foreign Exchange Rates and Purchasing Power Concepts
	8.7 CASE STUDY−−Selecting Electric Motors to Power an Assembly Line
	8.8 In-Class Exercise
	8.9 Try Your Skills
	8.10 Summary
	Problems
	Spreadsheet Exercises
	Case Study Exercises
	FE Practice Problems
9. Replacement Analysis
	9.1 Introduction
	9.2 Reasons for Replacement Analysis
	9.3 Factors that Must Be Considered in Replacement Studies
	9.4 Typical Replacement Problems
	9.5 Determining the Economic Life of a New Asset (Challenger)
	9.6 Determining the Economic Life of a Defender
	9.7 Comparisons in Which the Defender’s Useful Life Differs from that of the Challenger
	9.8 Retirement without Replacement (Abandonment)
	9.9 After-Tax Replacement Studies
	9.10 CASE STUDY−−Replacement of a Hospital’s Emergency Electrical Supply System
	9.11 In-Class Exercise
	9.12 Try Your Skills
	9.13 Summary
	Problems
	Spreadsheet Exercises
	Case Study Exercises
	FE Practice Problems
10. Evaluating Projects with the Benefit-Cost Ratio
	10.1 Introduction
	10.2 Perspective and Terminology for Analyzing Public Projects
	10.3 Self-Liquidating Projects
	10.4 Multiple-Purpose Projects
	10.5 Difficulties in Evaluating Public-Sector Projects
	10.6 What Interest Rate Should Be Used for Public Projects?
	10.7 The Benefit−Cost Ratio Method
	10.8 Evaluating Independent Projects by B−C Ratios
	10.9 Comparison of Mutually Exclusive Projects by B−C Ratios
	10.10 CASE STUDY−−Improving a Railroad Crossing
	10.11 Try Your Skills
	10.12 Summary
	Problems
	FE Practice Problems
11. Breakeven and Sensitivity Analysis
	11.1 Introduction
	11.2 Breakeven Analysis
	11.3 Sensitivity Analysis
	11.4 Multiple Factor Sensitivity Analysis
	11.5 Try Your Skills
	11.6 Summary
	Problems
	Spreadsheet Exercises
	FE Practice Problems
12. Probabilistic Risk Analysis
	12.1 Introduction
	12.2 Sources of Uncertainty
	12.3 The Distribution of Random Variables
	12.4 Evaluation of Projects with Discrete Random Variables
	12.5 Evaluation of Projects with Continuous Random Variables
	12.6 Evaluation of Risk and Uncertainty by Monte Carlo Simulation
	12.7 Performing Monte Carlo Simulation with a Computer
	12.8 Decision Trees
	12.9 Real Options Analysis
	12.10 Summary
	Problems
	Spreadsheet Exercises
13. The Capital Budgeting Process
	13.1 Introduction
	13.2 Debt Capital
	13.3 Equity Capital
	13.4 The Weighted Average Cost of Capital (WACC)
	13.5 Project Selection
	13.6 Postmortem Review
	13.7 Budgeting of Capital Investments and Management Perspective
	13.8 Leasing Decisions
	13.9 Capital Allocation
	13.10 Summary
	Problems
14. Decision Making Considering Multiattributes
	14.1 Introduction
	14.2 Examples of Multiattribute Decisions
	14.3 Choice of Attributes
	14.4 Selection of a Measurement Scale
	14.5 Dimensionality of the Problem
	14.6 Noncompensatory Models
	14.7 Compensatory Models
	14.8 Summary
	Problems
	Spreadsheet Exercises
APPENDICES
	A. Accounding Fundamentals
		A.1 The Fundamental Accounting Equation
		A.2 Basic Accounting Transactions
		A.3 Example – Peavy Design2
		A.4 Cost Accounting
		A.5 Cost Accounting Example
	B. Abbreviations and Notation
	C. Interest and Annuity Tables for Discrete Compounding
	D. Interest and Annuity Tables for Continuous Compounding
	E. Standard Normal Distribution
	F .Selected References
	G. Solutions to Try Your Skills
	H. Answers to Selected Problems
INDEX