Fundamentals of Engineering Economic Analysis

by White, John A.; Grasman, Kellie S.; Case, Kenneth E.; Needy, Kim Lascola; Pratt, David B.

• ISBN13: 9781118414705
• ISBN10: 1118414705
• Format: Hardcover
• Copyright: 2013-08-12
• Publisher: John Wiley & Sons Inc

Summary

Fundamentals of Engineering Economics, 1st Edition provides streamlined topical coverage with a modern and pedagogically-rich presentation. This text features a tight integration of Excel along with a wealth of real world vignettes to reinforce how students will use economics in their future careers. Fundamentals of Engineering Economics, 1st Edition provides enough content for every instructor to choose his/her favorite topics, but is streamlined enough to feel approachable to students. A pedagogically-rich approach combined with strong digital offerings make the course manageable, leaving students with the Engineering Economics knowledge needed for future careers.

Table of Contents

CHAPTER 1 An Overview of Engineering Economic Analysis 3

Introduction 4

1-1 Time Value of Money 4

1-2 Engineering Economy Principles 7

1-3 Economic Justifi cation of Capital Investments 10

Summary 15

FE-Like Problems 17

Problems 18

CHAPTER 2 Time Value of Money Calculations 23

Introduction 23

2-1 Cash Flow Diagrams 24

2-2 Single Cash Flows 26

2-3 Multiple Cash Flows 35

2-4 Compounding Frequency 55

2.4.1 Period Interest Rate Approach 56

2.4.2 Effective Annual Interest Rate 58

2.4.3 When Compounding and Cash Flow Frequencies Differ 61

Summary 62

FE-Like Problems 67

Problems 69

CHAPTER 3 Equivalence, Loans, and Bonds 93

Introduction 93

3-1 Equivalence 94

3-2 Interest Payments and Principal Payments 100

3-3 Bond Investments 106

3-4 Variable Interest Rates 110

3-5 Annual Percentage Rate 111

Summary 113

FE-Like Problems 114

Problems 116

CHAPTER 4 Present Worth 125

Introduction 126

4-1 Comparing Alternatives 126

4-2 Present Worth Calculations 130

4-3 Benefi t-Cost Analysis 137

4-4 Discounted Payback Period 144

4-5 Capitalized Worth 152

Summary 157

FE-Like Problems 159

Problems 162

CHAPTER 5 Annual Worth and Future Worth 179

Introduction 179

5-1 Annual Worth 180

5-2 Future Worth 185

Summary 194

FE-Like Problems 195

Problems 196

CHAPTER 6 Rate of Return 213

Introduction 214

6-1 Internal Rate of Return Calculations 215

6-2 External Rate of Return Calculations 224

Summary 231

FE-Like Problems 232

Problems 235

CHAPTER 7 Replacement Analysis 257

Introduction 258

7-1 Fundamentals of Replacement Analysis 258

7-2 Cash Flow and Opportunity Cost Approaches 261

7-3 Optimum Replacement Interval 264

Summary 268

FE-Like Problems 269

Problems 271

CHAPTER 8 Depreciation 285

Introduction 286

8-1 The Role of Depreciation in Economic Analysis 287

8-2 Language of Depreciation 288

8-3 Straight-Line and Declining Balance Depreciation Methods 289

8-4 Modifi ed Accelerated Cost Recovery System (MACRS) 296

Summary 301

FE-Like Problems 303

Problems 305

CHAPTER 9 Income Taxes 317

Introduction 317

9-1 Corporate Income Tax Rates 319

9-2 After-Tax Analysis Using Retained Earnings (No Borrowing) 322

9-3 After-Tax Analysis Using Borrowed Capital 330

9-4 Leasing versus Purchasing Equipment 336

Summary 338

FE-Like Problems 340

Problems 342

CHAPTER 10 Inflation 359

Introduction 360

10-1 The Meaning and Measure of Infl ation 360

10-2 Before-Tax Analysis 364

10-3 After-Tax Analysis 367

10-4 After-Tax Analysis with Borrowed Capital 369

Summary 373

FE-Like Problems 375

Problems 377

CHAPTER 11 Break-Even, Sensitivity, and Risk Analysis 391

Introduction 392

11-1 Break-Even Analysis 393

11-2 Sensitivity Analysis 398

11-3 Risk Analysis 405

Summary 418

FE-Like Problems 419

Problems 421

CHAPTER 12 Capital Budgeting 437

Introduction 438

12-1 The Classical Capital Budgeting Problem 438

12-2 Capital Budgeting Problem with Indivisible Investments 440

12-3 Capital Budgeting Problem with Divisible Investments 446

12-4 Practical Considerations in Capital Budgeting 449

Summary 450

FE-Like Problems 451

Problems 453

A P P E N D I X A Time Value of Money Factors Tables 000

A P P E N D I X B Obtaining and Estimating Cash Flows 000

Introduction 000

B-1 Cost Terminology 000

B-2 Cost Estimation 000

B-3 General Accounting Principles 000

B-4 Cost Accounting Principles 000

Summary 000

FE-Like Problems 000

Problems 000