Principles of Engineering Economic Analysis, 5th Edition

by John A. White (University of Arkansas ); Kenneth E. Case (Oklahoma State Univ.); David B. Pratt (Oklahoma State Univ.)

• ISBN13: 9780470113967
• ISBN10: 0470113960
• Edition: 5th
• Format: Hardcover
• Copyright: 2009-01-01
• Publisher: Wiley

Summary

This concise book provides engineers with the tools to evaluate the cost of their work and convey the project to key decision makers. It follows an integrative approach that arms them with a seven-step Systematic Evaluation and Analysis Technique as well as a strong understanding of cash flows. The new fifth edition has also been expanded from eight to 16 chapters, covering critical topics such as time value of money, measures of worth, depreciation, inflation, and capital rationing. Practicing engineers will be able to apply these principles and techniques to make the most effective economic decisions.

Table of Contents

Preface

Engineering Economic Analysis

Introduction

Time Value of Money

Ten Principles of Engineering Economic Analysis

Systematic Economic Analysis Technique (SEAT)

When the Time Value of Money Need Not Be Considered

Summary

Time Value Of Money

Introduction

Cash Flow Diagrams

Simple Interest Calculations

Compound Interest Calculations

Multiple Compounding Periods in a Year

When Compounding and Cash Flow Frequencies Differ

Special and Limiting Cases of Time Value of Money Factors

Summary

Appendix

A Continuous Compound Interest Calculations (brief treatment)

Discrete Cash Flows

Continuous Cash Flows

Borrowing, Lending, And Investing

Introduction

Four Methods of Repaying Loans

Which Repayment Method Is Best for the Borrower?

Real Estate Investment

Interest Payments and Principal Payments

Retirement Planning

Equivalence and Indifference

Purchasing and Selling Bonds

Variable Interest Rates

Summary

Establishing The Planning Horizon And The Minimum Attractive Rate Of Return

Introduction

Choosing the Planning Horizon

Specifying the Minimum Attractive Rate of Return

Summary

Present Worth Analysis

Introduction

Comparing Alternatives

Present Worth: Single Alternative

Present Worth: Multiple Alternatives

Present Worth: "One Shot" Investments

Discounted Payback Period: Single Alternative

Discounted Payback Period: Multiple Alternatives

Capitalized Worth: Single Alternative

Capitalized Worth: Multiple Alternatives

Summary

Future Worth Analysis

Introduction

Future Worth: Single Alternative

Future Worth: Multiple Alternatives

Maximizing the Investment Portfolio

More on Unequal Lives

Summary

Annual Worth Analysis

Introduction

Annual Worth: Equal Lives

Annual Worth: Multiple Alternatives

Least Common Multiple of Lives Assumption

Unequal Lives Re-Visited

Capital Recovery Cost

Summary

Rate Of Return Analysis

Introduction

Internal Rate of Return: Single Alternative

Internal Rate of Return: Multiple Alternatives

External Rate of Return: Single Alternative

External Rate of Return: Multiple Alternatives

Analyzing Alternatives with No Positive Cash Flows

Summary

Appendix

A Modified Internal Rate of Return

Single Alternative

Multiple Alternatives

Depreciation Methods

Introduction

Background on Depreciation Accounting

Straight Line Depreciation (SLN)

Declining Balance and Double Declining Balance Depreciation (DB and DDB)

Switching from DDB to SLN with VDB

Modified Accelerated Cost Recovery System (MACRS)

Comparison of Depreciation Methods

Summary

Appendix

A Sum-of-Years-Digits Depreciation

Appendix

B Other Depreciation Methods

Unit of Production Method

Operating Day (Hour) Method

Income Forecast Method

Appendix

C Depletion

After-Tax Economic Analysis

Introduction

Tax Concepts

Corporate Income Taxes

After-Tax Cash Flow without Borrowing

After-Tax Comparison of Alternatives

After-Tax Cash Flows with Borrowing

How Much Money Should a Company Borro

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