| |
| |
| 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 | |
| |
| |
| Minimu<$$$> | |