## Description

## 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 Try Your Skills
- 1.6 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 Try Your Skills
- 2.7 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 Case Study—Demanufacturing of Computers
- 3.6 Electronic Spreadsheet Modeling: Learning Curve
- 3.7 Try Your Skills
- 3.8 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 Try Your Skills
- 4.19 Summary

## 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 Electronic Spreadsheet Modeling: Payback Period Method
- 5.11 Try Your Skills
- 5.12 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 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 Try Your Skills
- 6.11 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 Try Your Skills
- 7.13 Summary

## CHAPTER 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 Try Your Skills
- 8.9 Summary

## CHAPTER 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 inWhich 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 Summary

## 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 Ratios
- 10.10 Case Study—Improving a Railroad Crossing
- 10.11 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 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 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

## 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 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