Engineering Economy

Description

Understand the importance of engineering economics principles and how to make smart economic choices Used by engineering students worldwide, this bestselling text provides a sound understanding of the principles, basic concepts, and methodology of engineering economy. Explanations and examples that are student-centered and practical in real-life situations help students develop pro ciency in the methods and processes for making rational decisions. Built upon the rich and time-tested teaching materials of earlier editions, the text is extensively revised and updated to reflect current trends and issues. The new edition captures the spirit of environmental sustainability with more than 160 “green” problems, as well as new end-of-chapter problems and group exercises, and includes updates to the new 2017 Federal Tax code revisions. 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