This comprehensive yet accessible text emphasizes problem solving, evaluation of projects, capital budgeting and resource allocation under risk and uncertainty. Current theory of economics and finance is also discussed andthe text is complemented by a full set of problems, exercises and case studies.

Preface
The scope of engineering economics
Engineering and investment economics
Long-range planning in business
The investment decision
The scope of engineering economics
Compounding, discounting, and economic equivalence
Time value on money
Compounding
Discounting
Interest rate formulas
Economic equivalence
Cash flow analysis and inflation
Economic modeling
Estimating the life of an investment
The interest rate
The cash flow
Discounting costs or negative cash flows
Incremental cash flows
Inflation and its measurement
Inflation and its impact on cash flows
Choosing between investments
Methods for evaluating investments
Net present value
Internal rate of return
Profitability index
Annual equivalent amount
Capital recovery cost with return
Capitalized equivalent
Payback period
Depreciation, taxes, and cost of capital
The concept of depreciation
Methods of depreciation
Comparison of depreciation methods
Corporate income taxes
Effect of different methods of depreciation on cash flow
The cost of capital
Calculating the marginal cost of capital
Comparing alternative investments
The need to compare alternatives
Constraints to investment
Types of alternatives
Classification of alternatives
Comparing alternatives
Comparing alternatives with different outlays
Comparing alternatives with different timing of a cash flows
Comparing alternatives with different lives
Replacement analysis
Approaches to replacement analysis
The outsider viewpoint approach
Replacement based on uniform annual costs
Replacement based on unequal annual costs
Replacement based on cash flows
Repeated life analysis
Economic life for asset replacement
Project selection
Risk analysis
The concept of risk
Measuring the risk of a project
Example of risk management
Project net present value
Risk-adjusted discount rate approach
NPV of projects based onrisk
Another example of risk-adjusted discount rate
Decision tree analysis
Risk analysis models
Project NPV and risk when cash flows are dependent (perfectly correlated)
Example of NPV and risk of project with dependent cash flows
Project NPV and risk when cash flows are independent (not correlated)
Example of NPV and risk of project with independent cash flows
Determining the probability of NPV being positive
Expected NPV and project risk when cash flows are interdependent (moderately correlated)
Example of conditional probability method for project NPV and risk (interdependent cash flows)
Comparison of projects obased on risk
Capital rationaing methods
NPV approach to capital rationing
Profitability index approach
IRR approach to capital rationing
External capital rationing
External capital rationing
Linear programming for cpaital budgeting
Example of linear programming in cpital budgeting
Problems
Case study
Evaluation of public projects
The nature of public projects
Life-cycle costing of public projects
Life-cycle costing based on present worth
Benefit-cost analysis
The benefit-cost ratio
The discount rate
Benefit-cost analysis of a single project
Alternative BCR formulation
Benefit-cost analysis of mutually exclusive projects
Benefit-cost analysis of three mutually exclusive proposals
Approached to benefit-cost analysis by U S government agencies
Examples of benefit-cost analysis of government projects
Capital budgeting for multiple projects
Selection of projects under capital rationing
Economic decision models
Cost analysis
The production function
The concept of cost
Cost functions
Short-run and long-run costs
Short-run cost function
The feneral (cubic) cost function
Quadratic cost functions
Linear cost functions
Production cost analysis
Cost analysis models
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