Preface
Acknowledgments
PART 1 Fundamentals of Engineering Economy
CHAPTER 1 Introduction to Engineering Economy
1.1 Introduction
1.2 The Principles of EngineeringEconomy
1.3 Engineering Economy and the DesignProcess
1.4 Using Spreadsheets in EngineeringEconomic 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 DaytimeRunning 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 DesignProcess
3.6 Case Study——Demanufacturing ofComputers
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 andTables
4.6 Relating Present and Future EquivalentValues of Single Cash Flows
4.7 Relating a Uniform Series (Annuity) toIts Present and Future Equivalent Values
4.8 Summary of Interest Formulas andRelationships for Discrete Compounding
4.9 Deferred Annuities (UniformSeries)
4.10 Equivalence Calculations InvolvingMultiple Interest Formulas
4.11 Uniform (Arithmetic) Gradient of CashFlows
4.12 Geometric Sequences of CashFlows
4.13 Interest Rates that Vary withTime
4.14 Nominal and Effective InterestRates
4.15 Compounding More Often than Once perYear
4.16 Interest Formulas for ContinuousCompounding 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 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 ReturnMethod
5.7 The External Rate of ReturnMethod
5.8 The Payback (Payout) PeriodMethod
5.9 Case Study——A Proposed CapitalInvestment to Improve Process Yield
5.10 Summary
Appendix 5-A The Multiple Rate of ReturnProblem with the IRR Method
CHAPTER 6 Comparison and Selection amongAlternatives
6.1 Introduction
6.2 Basic Concepts for ComparingAlternatives
6.3 The Study (Analysis) Period
6.4 Useful Lives Are Equal to the StudyP.eriod
6.5 Useful Lives Are Unequal among theAlternatives
6.6 Personal Finances
6.7 Case Study--Ned and Larry's Ice CreamCompany
6.8 Postevaluatio.n of Results
6.9 Summary
CHAPTER 7 Depreciation and Income Taxes
7.1 Introduction
7.2 Depreciation Concepts andTerminology
7.3 The Classical (Historical)Depreciation, Methods
7.4 The Modified Accelerated Cost Recovery'System
7.5 A Comprehensive DepreciationExample
7.6 Introduction to ,Income Taxes
7,7 The Effective (Marginal)CorporateIncome Tax Rate
7.8 Gain (Loss) on the Disposal of anAsset
7.9 General.Procedure for Making After;TaxEconomic Analyses
7.10 Illustration of Computations ofATCFs
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 PurchasingPower Concepts
8.6 Case Study--Selecting Electric Moto.rsto 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 inReplacement Studies
9.4 Typisal Replacement Problems
9.5 Determining the Economic Life:of a NewAsset (Challenger)
9.6 Determining the Economic Life of aDefender
9.7 Comparisons in which the Defender'sUseful Life Differs from that of the Challenger
9.8 Retirement without Replacement(Abandonment)
9.9 AfterTax Replacement Studies
9.10 Case Study--Replacement of aHospital's Emergency Electrical Supply System
9.11 Summary
PART Ⅲ Additional Topics in Engineering Economy
CHAPTER 10 Evaluating Projects with the Benefit-CostRatio Method
10.1 Introduction
10.2 Perspective and Terminology forAnalyzing Public Projects
10.3 Self-Liquidating Projects
10.4 Multiple-Purpose Projects
10.5 Difficulties in EvaluatingPublic-Sector Projects
10.6 What Interest Rate Should Be Used forPublic Projects?
10.7 The Benefit-Cost Ratio Method
10.8 Evaluating Independent Projects by B-CRatios
10.9 Comparison of Mutually ExclusiveProjects by B--C Rations
10.10 Criticisms and Shortcomings of theBenefit-Cost Ratio Method
10.11 Case Study--Improving a RailroadCrossing
10.12 Summary
CHAPTER 11 Breakeven and Sensitivity Analysis
11.1 Introduction.
11.2 Breakeven Analysis
11.3 Sensitivity Analysis
11.4 Multiple Factor SensitivityAnalysis
11.5 Case Study--Analysis of a BusinessVenture
11.6 Summary
CHAPTER 12 Probabilistic Risk Analysis
12.1 Introduction
12.2 Sources of Uncertainty
12.3 The Distribution of RandomVariables
12.4 Evaluation of Projects with DiscreteRandom Variables
12.5 Evaluation of Projects with ContinuousRandom Variables
12.6 Evaluation of Uncertainty by MonteCarlo Simulation
12.7 Performing Monte Carlo Simulation witha Computer
12.8 Decision Trees
12.9 Real Options Analysis
12.10 Case Study--The Oils Well That EndsWell 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 andManagement Perspective
13.8 Leasing Decisions
13.9 Capital Allocation
13.10 Case Study--Financing anAutomobile
13.11 Summary
CHAPTER 14 Decision Making ConsideringMultiattributes
14.1 Introduction
14.2 Examples of MultiattributeDecisions
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 EconomyProblems
B Abbreviations and Notation
C Interest and Annuity Tables for DiscreteCompounding
D Interest and Annuity Tables for ContinuousCompounding
E Standard Normal Distribution
F Selected References
G Answers to Selected Problems
Index
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