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 Economy
• 1.5 Try Your Skills
• 1.6 Summary

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 Value Engineering
• 2.7 In-Class Exercise
• 2.8 Try Your Skills
• 2.9 Summary

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: Electric Vehicle Battery Recovery
• 3.6 Electronic Spreadsheet Modeling: Learning Curve
• 3.7 In-Class Exercise
• 3.8 Try Your Skills
• 3.9 Summary

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 In-Class Exercise
• 4.19 Try Your Skills
• 4.20 Summary

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: Data Center Establishment Project
• 5.10 Electronic Spreadsheet Modeling: Payback Period Method
• 5.11 In-Class Exercise
• 5.12 Try Your Skills
• 5.13 Summary
• Appendix 5-A The Multiple Rate of Return Problem with the IRR Method

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

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 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

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 Global 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

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

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: Rural Broadband Internet Expansion
• 10.11 Try Your Skills
• 10.12 Summary

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: If You Build It, They Will Come
• 11.6 Try Your Skills
• 11.7 Summary

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 CASE STUDY: Retirement Balance
• 12.11 Summary

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

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

Appendices

• A. Accounting Fundamentals
• 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