Engineering Economy / Edition 13

Engineering Economy / Edition 13

by William Sullivan, Elin Wicks, James Luxhoj
     
 

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ISBN-10: 0131486497

ISBN-13: 9780131486492

Pub. Date: 05/24/2005

Publisher: Prentice Hall Professional Technical Reference

This best-selling book provides a sound understanding of the principles, basic concepts, and methodology of engineering economy. Built upon the rich and time-tested teaching materials of earlier editions, it is extensively revised and updated to reflect current trends and issues, with an emphasis on the economics of engineering design throughout. It provides one of

Overview

This best-selling book provides a sound understanding of the principles, basic concepts, and methodology of engineering economy. Built upon the rich and time-tested teaching materials of earlier editions, it is extensively revised and updated to reflect current trends and issues, with an emphasis on the economics of engineering design throughout. It provides one of the most complete and up-to-date studies of this vitally important field.

Features:

  • NEW -- More design economics problems and cost estimating.
  • NEW -- A full chapter on Communicating Engineering Economy Study Results. Provides students with tips on how to "sell" their projects to decision-makers in management.
  • NEW -- Global issues are discussed in terms of exchange rate problems.
  • NEW -- Deflation effects on project economics highlighted.
  • NEW -- New and updated end-of-chapter problems.
  • NEW -- Test Companion Website www.prenhall.com/sullivan. Devoted to electronic media that supports engineering economy courses.
  • NEW -- Student portfolios. Offers suggestions for creating and using student portfolios to facilitate integrated learning of topics in engineering economy.
  • NEW -- Economic Value Added. Uses an after-tax cash flow analysis to explain the concept of "economic value added."
  • NEW -- Cost of capital. Explains the cost of equity and debt capital as well as the weighted average cost of capital and its relationship to rate of return concepts.
  • Real-world engineering economy analysis methodology.
  • Case studies demonstrate the integrated application of the principles, basic concepts, and methodology used by engineers in typical, real-world situations.
  • Cost estimating, design economics, and electronic spreadsheets.
  • Capital investments. Examines the theoretical and practical aspects of selecting among capital investments.
  • Internet-accessible electronic spreadsheets. Provides approximately 50 basic templates for all major topics in the text and summarizes formulas and key concepts.
  • Examples. Allows to students to more readily understand concepts and reinforces learning.
.

Product Details

ISBN-13:
9780131486492
Publisher:
Prentice Hall Professional Technical Reference
Publication date:
05/24/2005
Edition description:
Older Edition
Pages:
704
Product dimensions:
7.60(w) x 9.30(h) x 1.20(d)

Table of Contents

Forewordxiii
Prefacexv
Part IFundamentals of Engineering Economy1
Chapter 1Introduction to Engineering Economy2
1.1Introduction2
1.2Origins of Engineering Economy4
1.3What Are the Principles of Engineering Economy?4
1.4Engineering Economy and the Design Process8
1.5Accounting and Engineering Economy Studies17
1.6Overview of the Book18
1.7Summary20
1.8Problems20
Chapter 2Cost Concepts and Design Economics23
2.1Introduction24
2.2Cost Estimating and Cost Terminology24
2.3The General Economic Environment37
2.4Cost-Driven Design Optimization46
2.5Present Economy Studies52
2.6Summary59
2.7References59
2.8Problems59
Chapter 3Money-Time Relationships and Equivalence67
3.1Introduction67
3.2Why Consider Return to Capital?68
3.3The Origins of Interest69
3.4Simple Interest69
3.5Compound Interest70
3.6The Concept of Equivalence71
3.7Notation and Cash Flow Diagrams/Tables74
3.8Interest Formulas Relating Present and Future Equivalent Values of Single Cash Flows77
3.9Interest Formulas Relating a Uniform Series (Annuity) to Its Present and Future Equivalent Values82
3.10Interest Formulas for Discrete Compounding and Discrete Cash Flows89
3.11Deferred Annuities (Uniform Series)89
3.12Equivalence Calculations Involving Multiple Interest Formulas91
3.13Interest Formulas Relating a Uniform Gradient of Cash Flows to Its Annual and Present Equivalents95
3.14Interest Formulas Relating a Geometric Sequence of Cash Flows to Its Present and Annual Equivalents101
3.15Interest Rates That Vary with Time105
3.16Nominal and Effective Interest Rates106
3.17Interest Problems with Compounding More Often Than Once per Year108
3.18Interest Problems with Cash Flows Less Often Than Compounding Periods110
3.19Interest Formulas for Continuous Compounding and Discrete Cash Flows114
3.20Interest Formulas for Continuous Compounding and Continuous Cash Flows116
3.21Additional Solved Problems119
3.22Spreadsheet Applications124
3.23Summary125
3.24References126
3.25Problems126
Part IIBasic Topics in Engineering Economy143
Chapter 4Applications of Money-Time Relationships144
4.1Introduction144
4.2Determining the Minimum Attractive Rate of Return145
4.3The Present Worth Method148
4.4The Future Worth Method153
4.5The Annual Worth Method154
4.6The Internal Rate of Return Method157
4.7The External Rate of Return Method168
4.8The Payback (Payout) Period Method170
4.9Investment Balance Diagrams171
4.10An Example of a Proposed Capital Investment to Improve Process Yield174
4.11Spreadsheet Applications175
4.12Summary177
4.13References178
4.14Problems178
Appendix 4-AThe Multiple Rate of Return Problem with the IRR Method186
Chapter 5Comparing Alternatives188
5.1Introduction188
5.2Basic Concepts for Comparing Alternatives189
5.3The Study (Analysis) Period193
5.4Case 1: Useful Lives Are Equal to the Study Period194
5.5Case 2: Useful Lives Are Different Among the Alternatives211
5.6Comparison of Alternatives Using the Capitalized Worth Method220
5.7Defining Mutually Exclusive Investment Alternatives in Terms of Combinations of Projects222
5.8Spreadsheet Applications228
5.9Summary231
5.10References231
5.11Problems232
Chapter 6Depreciation and Income Taxes242
6.1Introduction243
6.2Depreciation Concepts and Terminology243
6.3The Classical (Historical) Depreciation Methods246
6.4The Modified Accelerated Cost Recovery System252
6.5A Comprehensive Depreciation Example259
6.6Depletion262
6.7Introduction to Income Taxes265
6.8The Effective (Marginal) Corporate Income Tax Rate267
6.9Gain (Loss) on the Disposal of an Asset271
6.10General Procedure for Making After-Tax Economic Analyses271
6.11Illustration of Computations of ATCFs276
6.12Economic Value Added284
6.13The After-Tax Effect of Depletion Allowances286
6.14Summary288
6.15References288
6.16Problems289
Chapter 7Cost Estimation Techniques296
7.1Introduction296
7.2An Integrated Approach297
7.3Selected Estimating Techniques (Models)307
7.4Parametric Cost Estimating312
7.5Cost Estimation in the Design Process322
7.6Estimating Cash Flows for a Typical Small Project332
7.7Summary335
7.8References335
7.9Problems336
Appendix 7-A341
Chapter 8Price Changes and Exchange Rates349
8.1Price Changes350
8.2Terminology and Basic Concepts352
8.3Differential Price Inflation or Deflation362
8.4Application Strategy368
8.5A Comprehensive Example369
8.6Foreign Exchange Rates and Purchasing Power Concepts372
8.7Spreadsheet Applications377
8.8Summary379
8.9References380
8.10Problems380
Chapter 9Replacement Analysis388
9.1Introduction388
9.2Reasons for Replacement Analysis389
9.3Factors That Must Be Considered in Replacement Studies390
9.4A Typical Replacement Problem394
9.5Determining the Economic Life of a New Asset (Challenger)398
9.6Determining the Economic Life of a Defender403
9.7Comparisons in Which the Defender's Useful Life Differs from That of the Challenger406
9.8Retirement without Replacement (Abandonment)410
9.9A Comprehensive Example412
9.10Spreadsheet Applications414
9.11Summary415
9.12References416
9.13Problems417
Chapter 10Dealing with Uncertainty424
10.1Introduction424
10.2What Are Risk, Uncertainty, and Sensitivity?425
10.3Sources of Uncertainty426
10.4Sensitivity Analysis427
10.5Analyzing a Proposed Business Venture441
10.6Risk-Adjusted Minimum Attractive Rates of Return445
10.7Reduction of Useful Life446
10.8Spreadsheet Applications449
10.9Summary451
10.10References451
10.11Problems452
Part IIIAdditional Topics in Engineering Economy459
Chapter 11Evaluating Projects with the Benefit/Cost Ratio Method460
11.1Introduction460
11.2Perspective and Terminology for Analyzing Public Projects461
11.3Self-Liquidating Projects463
11.4Multiple-Purpose Projects463
11.5Difficulties in Evaluating Public Sector Projects465
11.6What Interest Rate Should Be Used for Public Projects?467
11.7The Benefit/Cost Ratio Method469
11.8Evaluating Independent Projects by B/C Ratios475
11.9Comparison of Mutually Exclusive Projects by B/C Ratios477
11.10Criticisms and Shortcomings of the Benefit/Cost Ratio Method482
11.11Spreadsheet Applications484
11.12Summary486
11.13References486
11.14Problems486
Chapter 12Engineering Economy Studies in Investor-Owned Utilities492
12.1Background492
12.2General Characteristics of Investor-Owned Utilities493
12.3General Concepts of Utility Economy Studies495
12.4Methods of Engineering Economy for Investor-Owned Utility Projects495
12.5Development of the Revenue Requirement Method497
12.6Assumptions of the Revenue Requirement Method498
12.7Utility Rate Regulation499
12.8Flow-Through and Normalized Accounting500
12.9Illustration of the Revenue Requirement Method: A Tabular Procedure505
12.10Immediate versus Deferred Investment505
12.11Revenue Requirement Analysis under Conditions of Inflation505
12.12Summary509
12.13References510
12.14Problems510
Chapter 13Probabilistic Risk Analysis514
13.1Introduction514
13.2The Distribution of Random Variables515
13.3Evaluation of Projects with Discrete Random Variables519
13.4Evaluation of Projects with Continuous Random Variables526
13.5Evaluation of Uncertainty Using Monte Carlo Simulation531
13.6Performing Monte Carlo Simulation with a Computer535
13.7Decision Trees540
13.8Spreadsheet Applications548
13.9Summary550
13.10References551
13.11Problems551
Chapter 14Capital Financing and Allocation559
14.1Introduction559
14.2Differences between Sources of Capital561
14.3Cost of Debt Capital563
14.4Cost of Equity Capital567
14.5Weighted Average Cost of Capital571
14.6Leasing as a Source of Capital572
14.7Capital Allocation575
14.8An Overview of a Typical Corporate Capital Budgeting Process583
14.9Summary587
14.10References587
14.11Problems587
Chapter 15Communicating Engineering Economy Study Results591
15.1Introduction591
15.2Top Managers' Roles and Responsibilities592
15.3Management's Perspectives592
15.4Communication Strategies594
15.6Summary596
Part IVAppendixes597
Appendix
AAccounting and Its Relationship to Engineering Economy598
BAbbreviations and Notation616
CInterest and Annuity Tables for Discrete Compounding621
DInterest and Annuity Tables for Continuous Compounding640
EStandardized Normal Distribution Function644
FSelected References647
GAnswers to Selected Even-Numbered Problems650
Index656

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