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