*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.

**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