LEVEL ONE THIS IS HOW IT ALL STARTS
Chapter 1 Foundations of Engineering Economy
1.1 Why Engineering Economy Is Important to Engineers (and Other Professionals)
1.2 Role of Engineering Economy in Decision Making
1.3 Performing an Engineering Economy Study
1.4 Interest Rate and Rate of Return
1.5 Equivalence
1.6 Simple and Compound Interest
1.7 Terminology and Symbols
1.8 Introduction to Solution by Computer
1.9 Minimum Attractive Rate of Return
1.10 Cash Flows: Their Estimation and Diagramming
1.11 Rule of 72: Estimating Doubling Time and Interest Rate
1.12 Spreadsheet Application--Simple and Compound Interest, and Changing
Cash Flow Estimates
Additional Examples
Chapter Summary
Problems
FE Review Problems
Extended Exercise--Effects of Compound Interest
Case Stndy--Describing Alternatives for Producing Refrigerator Shells
Chapter 2 Factors: How Time and Interest Affect Money
2.1 Single-Payment Factors (F/P and P/F)
2.2 Uniform-Series Present Worth Factor and Capital Recovery
Factor (PlA and A/P)
2.3 Sinking Fund Factor and Uniform-Series Compound Amount
Factor (A/F and F/A)
2.4 Interpolation in Interest Tables
2.5 Arithmetic Gradient Factors (P/G and A/G)
2.6 Geometric Gradient Series Factors
2.7 Determination of an Unknown Interest Rate
2.8 Determination of Unknown Number of Years
2.9 Spreadsheet Application--Basic Sensitivity Analysis
Additional Example
Chapter Summary
Problems
FE Review Problems
Case Study--What a Difference the Years and Compound Interest Can Make
Chapter 3 Combining Factors
3.1 Calculations for Uniform Series That Are Shifted
3.2 Calculations Involving Uniform-Series and Randomly Placed Single Amounts
3.3 Calculations for Shifted Gradients
3.4 Shifted Decreasing Arithmetic Gradients
3.5 Spreadsheet Application--Using Different Functions
Additional Example
Chapter Summary
Problems
FE Review Problems
Extended Exercise--Preserving Land for Public Use
Chapter 4 Nominal and Effective Interest Rates
4.1 Nominal and Effective Interest Rate Statements
4.2 Effective Annual Interest Rates
4.3 Effective Interest Rates for Any Time Period
4.4 Equivalence Relations: Comparing Payment Period and Compounding Period
Lengths (PP versus CP)
4.5 Equivalence Relations: Single Amounts with PP -- CP
4.6 Equivalence Relations: Series with PP --> CP
4.7 Equivalence Relations: Single Amounts and Series with PP < CP
4.8 Effective Interest Rate for Continuous Compounding
4.9 Interest Rates That Vary over Time
Chapter Summary
Problems
FE Review Problems
Case Study---Financing a House
LEVEL TWO TOOLS FOR EVALUATING ALTERNATIVES
Chapter 5 Present Worth Analysis
5.1 Formulating Mutually Exclusive Alternatives
5.2 Present Worth Analysis of Equal-Life Alternatives
5.3 Present Worth Analysis of Different-Life Alternatives
5.4 Future Worth Analysis
5.5 Capitalized Cost Calculation and Analysis
5.6 Payback Period Analysis
5.7 Life-Cycle Cost
5.8 Present Worth of Bonds
5.9 Spreadsheet Applications--PW Analysis and Payback Period
Chapter Summary
Problems
FE Review Problems
Extended Exercise---Evaluation of Social Security Retirement Estimates
Case Study--Payback Evaluation of Ultralow-Fhish Toilet Program
Chapter 6 Annual Worth Analysis
6.1 Advantages and Uses of Annual Worth Analysis
6.2 Calculation of Capital Recovery and AW Values
6.3 Evaluating Alternatives by Annual Worth Analysis
6.4 AW of a Permanent Investment
Chapter Summary
Problems
FE Review Problems
Case Study The Changing Scene of all Annual Worth Analysis
Chapter 7 Rate of Return Analysis: Single Alternative
7.1 Interpretation of a Rate of Return Value
7.2 Rate of Return Calculation Using a PW or AW Equation
7.3 Cautions When Using the ROR Method
7.4 Multiple Rate of Return Values
7.5 Composite Rate of Return: Removing Multiple i* Values
7.6 Rate of Return of a Bond Investment
Chapter Summary
Problems
FE Review Problems
Extended Exercise 1--The Cost of a Poor Credit Rating
Extended Exercise 2---When Is It Best to Sell a Business?
Case Study---Bob Learns About Multiple Rates of Return
Chapter 8 Rate of Return Analysis: Multiple Alternatives
8.1 Why Incremental Analysis is Necessary
8.2 Calculation of Incremental Cash Flows for ROR Analysis
8.3 Interpretation of Rate of Return on the Extra Investment
8.4 Rate of Return Evaluation Using PW: Incremental and Breakeven
8;5 Rate of Return Evaluation Using AW
8.6 Incremental ROR Analysis of Multiple, Mutually Exclusive Alternatives
8.7 Spreadsheet Application--PW, AW, and ROR Analyses All in One
Chapter Summary
Problems
FE Review Problems
Extended Exercise---Incremental ROR Analysis When Estimated
Alternative Lives are Uncertain
Case Study 1---So Many Options. Can a New Engineering Graduate
Help His Father?
Case Study 2--PW Analysis When Multiple Interest Rates Are Present
Chapter 9 Benefit/Cost Analysis and Public Sector Economics
9.1 Public Sector Projects
9.2 Benefit/Cost Analysis of a Single Project
9.3 Alternative Selection Using Incremental B/C Analysis
9.4 Incremental B/C Analysis of Multiple, Mutually Exclusive Alternatives
Chapter Summary
Problems
FE Review Problems
Extended Exercise---Costs to Provide Ladder Truck Service
for Fire Protection
Case Study--Freeway Lighting
Chapter 10 Making Choices: The Method, MARR,
and Multiple Attributes
10.1 Comparing Mutually Exclusive Alternatives by Different Evaluation Methods
10.2 MARR Relative to the Cost of Capital
10.3 Debt-Equity Mix and Weighted Average Cost of Capital
10.4 Determination of the Cost of Debt Capital
10.5 Determination of the Cost of Equity Capital and the MARR
10.6 Effect of Debt-Equity Mix on Investment Risk
10.7 Multiple Attribute Analysis: Identification and Importance of Each Attribute
10.8 Evaluation Measure for Multiple Attributes
Chapter Summary
Problems
Extended Exercise--Emphasizing the Right Things
Case Study--Which Way to Go~--Debt or Equity Financing?
LEVEL THREE MAKING DECISIONS ON REAL-WORLD PROJEctS
Chapter 11 Replacement and Retention Decisions
1 l.l Basics of the Replacement Study
11.2 Economic Service Life
11.3 Performing a Replacement Study
11.4 Additional Considerations in a Replacement Study,
11.5 Replacement Study over a Specified Study Period
Chapter Summary
Problems
FE Review Problems
Extended Exercise-Economic Service Life Under Varying Conditions
Case Study--Replacement Analysis for Quarry Equipment
Chapter 12 Selection {rom Independent Projects Under Budget Limitation
12,1 An Overview of Capital Rationing Among Projects
12.2 Capital Rationing Using PW Analysis of Equal-Life Projects
Capital Rationing Using PW Analysis of Unequal-Life Projects
Capital Budgeting Problem Formulation Using Linear Programming
Chapter Summary
Problems
Case Study--IAfelong Engineering Education in a Web Environment
Chapter 13 Breakeven Analysis
13.1 Breakeven Analysis for a Single Project
13.2 Breakeven Analysis Between Two Alternatives
13.3 Spreadsheet Application--Using Excel's SOLVER for Breakeven
Analysis
Chapter Summary
Problems
Case Study--Water Treatment Plant Process Costs
LEVEL FOUR ROUNDING OUT THE STUDY
Chapter 14 Effects of Inflation
14.1 Understanding the Impact of Inflation
14.2 Present Worth Calculations Adjusted for Inflation
14.3 Future Worth Calculations Adjusted for Inflation
14.4 Capital Recovery Calculations Adjusted for Inflation
Chapter Summary
Problems
FE Review Problems
Extended Exercise--Fixed-Income Investments versus the Forces
of Inflation
Chapter 15 Cost Estimation and Indirect Cost Allocation
15.1 Understanding How Cost Estimation Is Accomplished
15.2 Cost Indexes
15.3 Cost Estimating Relationships: Cost-Capacity Equations
15.4 Cost Estimating Relationships: Factor Method
15.5 Traditional Indirect Cost Rates and Allocation
15.6 Activity-Based Costing (ABC) for Indirect Costs
Chapter Summary
Problems
FE Review Problems
Case Study--Total Cost Estimates for Optimizing Coagulant Dosage
Case Study--Indirect Cost Comparison of Medical Equipment:
Sterilization Unit
Chapter 16 Depreciation Methods
16.1 Depreciation Terminology
16.2 Straight Line (SL) Depreciation
16.3 Declining Balance (DB) and Double Declining Balance (DDB) Depreciation
16.4 Modified Accelerated Cost Recovery System (MACRS)
16.5 Determining the MACRS Recovery Period
16.6 Depletion Methods
Chapter Summary
Problems
FE Review Problems
16A.1 Sum-of-Year Digits (SYD) Depreciation
16A.2 Switching Between Depreciation Methods
16A.3 Determination of MACRS Rates
Appendix Problems
Chapter 17 After-Tax Economic Analysis
17.1 Income Tax Terminology and Relations for Corporations (and Individuals)
17.2 Before-Tax and After-Tax Cash Flow
17.3 Effect on Taxes of Different Depreciation Methods and Recovery Periods
17.4 Depreciation Recapture and Capital Gains (Losses): for Corporations
17.5 After-Tax PW, AW, and ROR Evaluation
17.6 Spreadsheet Applications--After-Tax Incremental ROR Analysis
17.7 After-Tax Replacement Study
17.8 After-Tax Value-Added Analysis
Chapter Summary
Problems
Case Study--After-Tax Evaluation of Debt and Equity Financing
Chapter 18 Formalized Sensitivity Analysis and Expected Value Decisions5
18.1 Determining Sensitivity to Parameter Variation
18.2 Formalized Sensitivity Analysis Using Three Estimates
18.3 Economic Variability and the Expected Value
18.4 Expected Value Computations for Alternatives
18.5 Staged Evaluation of Alternatives Using a Decision Tree
Chapter Summary
Problems
Extended Exercise--Looking at Alternatives from Different Angles
Case Study--Sensitivity Analysis of Public Sector
Projects--Water Supply Plans
Chapter 19 More on Variation and Decision Making Under Risk
19.1 Interpretation of Certainty, Risk, and Uncertainty
19.2 Elements Important to Decision Making Under Risk
19.3 Random Samples
19.4 Expected Value and Standard Deviation
19.5 Monte Carlo Sampling and Simulation Analysis
Additional Examples
Chapter Summary
Problems
Extended Exercise---Using Simulation and the Excel RNG for
Sensitivity Analysis
Appendix A Using Spreadsheets and Microsoft Excel~
A. 1 Introduction to Using Excel
A.2 Organization (Layout) of the Spreadsheet
A.3 Excel Functions Important to Engineering Economy (alphabetical order)
A.4 SOLVER--An Excel Tool for Breakeven and "What If?." Analysis
A.5 List of Excel Financial Functions
A.6 Error Messages
Appendix B Basics of Accounting Reports and Business Ratios
B.1 The Balance Sheet
B.2 Income Statement and Cost of Goods Sold Statement
B.3 Business Ratios
Problems
Appendix C Final Answers to Selected End-of-Chapter Problems
Bibliography 700
Compound Interest
Factor Tables 702
Index 731
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