Preface

Acknowledgments

PART 1 Fundamentals of Engineering Economy

  CHAPTER 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 Summary

  CHAPTER 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 Summary

    Appendix 2-A Accounting Fundamentals

  CHAPTER 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 Cost Estimation in the Design
Process

    3.6 Case Study——Demanufacturing of
Computers

    3.7 Summary

  CHAPTER 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 Present and 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
Multiple Interest 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 Summary

Part Ⅱ Engineering Economy in Action

  CHAPTER 5 Evaluating a Single Project

    5.1 Introduction

    5.2 Determining the Minimum Attractive Rate
of 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 Summary

    Appendix 5-A The Multiple Rate of Return
Problem with the IRR Method

  CHAPTER 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
P.eriod

    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 Postevaluatio.n of Results

    6.9 Summary

  CHAPTER 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 Summary

  CHAPTER 8 Price Chancles and Exchancle Rates

    8.1 Introduction

    8.2 Terminology and Basic Concepts

    8.3 Fixed and Responsive Annuities

    8.4 Spreadsheet Application

    8.5 Foreign Exchange Rates and Purchasing
Power Concepts

    8.6 Case Study--Selecting Electric Moto.rs
to Power an Assembly Line

    8.7 Summary

  CHAPTER 9 Replacement Analysis

    9.1 Introduction

    9.2 Reasons for Replacement Anaiysis

    9.3 Factors that Must Be Considered in
Replacement Studies

    9.4 Typisal 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 AfterTax Replacement Studies

    9.10 Case Study--Replacement of a
Hospital's Emergency Electrical Supply System

    9.11 Summary

PART Ⅲ Additional Topics in Engineering Economy

  CHAPTER 10 Evaluating Projects with the Benefit-Cost
Ratio Method

    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 Rations

    10.10 Criticisms and Shortcomings of the
Benefit-Cost Ratio Method

    10.11 Case Study--Improving a Railroad
Crossing

    10.12 Summary

  CHAPTER 11 Breakeven and Sensitivity Analysis

    11.1 Introduction.

    11.2 Breakeven Analysis

    11.3 Sensitivity Analysis

    11.4 Multiple Factor Sensitivity
Analysis

    11.5 Case Study--Analysis of a Business
Venture

    11.6 Summary

  CHAPTER 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 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 Case Study--The Oils Well That Ends
Well Company

    12.11 Summary

  CHAPTER 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 Case Study--Financing an
Automobile

    13.11 Summary

  CHAPTER 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

PART Ⅳ Appendices

  A Using Excel to Solve Engineering Economy
Problems

  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 Answers to Selected Problems

Index