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| Understanding Money And Its Management | |
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| Engineering Economic Decisions | |
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| The Rational Decision-Making Process | |
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| How Do We Make Typical Personal Decisions? | |
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| How Do We Approach an Engineering Design Problem? | |
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| What Makes Economic Decisions Different from Other Design Decisions? | |
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| The Engineer's Role in Business | |
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| Making Capital-Expenditure Decisions | |
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| Large-Scale Engineering Economic Decisions | |
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| Impact of Engineering Projects on Financial Statements | |
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| Types of Strategic Engineering Economic Decisions | |
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| New Products or Product Expansion | |
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| Equipment and Process Selection | |
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| Cost Reduction | |
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| Equipment Replacement | |
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| Service or Quality Improvement | |
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| Fundamental Principles in Engineering Economics | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Time Value of Money | |
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| Interest: The Cost of Money | |
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| The Time Value of Money | |
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| Elements of Transactions Involving Interest | |
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| Methods of Calculating Interest | |
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| Economic Equivalence | |
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| Definition and Simple Calculations | |
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| Equivalence Calculations Require a Common Time Basis for Comparison | |
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| Interest Formulas for Single Cash Flows | |
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| Compound-Amount Factor | |
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| Present-Worth Factor | |
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| Solving for Time and Interest Rates | |
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| Uneven-Payment Series | |
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| Equal-Payment Series | |
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| Compound-Amount Factor: Find F , Given A , i , and N | |
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| Sinking-Fund Factor: Find A , Given F , i , and N | |
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| Capital-Recovery Factor (Annuity Factor): Find A , Given P , i and N | |
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| Present-Worth Factor: Find P , Given A , i , and N | |
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| Present Value of Perpetuities | |
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| Dealing with Gradient Series | |
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| Handling Linear Gradient Series | |
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| Handling Geometric Gradient Series | |
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| More on Equivalence Calculations | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Understanding Money Management | |
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| Market Interest Rates | |
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| Nominal Interest Rates | |
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| Annual Effective Yields | |
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| Calculating Effective Interest Rates Based on Payment Periods | |
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| Discrete Compounding | |
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| Continuous Compounding | |
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| Equivalence Calculations with Effective Interest Rates | |
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| Compounding Period Equal to Payment Period | |
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| Compounding Occurs at a Different Rate than That at Which Payments are Made | |
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| Debt Management | |
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| Borrowing with Credit Cards | |
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| Commercial Loans-Calculating Principal and Interest Payments | |
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| Comparing Different Financing Options | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Equivalence Calculations under Inflation | |
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| Measure of Inflation | |
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| Consumer Price Index | |
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| Producer Price Index | |
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| Average Inflation Rate | |
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| General Inflation Rate ( f ) versus Specific Inflation ( f j ) | |
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| Actual versus Constant Dollars | |
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| Conversion from Constant to Actual Dollars | |
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| Conversion from Actual to Constant Dollars | |
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| Equivalence Calculations under Inflation | |
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| Market and Inflation-Free Interest Rates | |
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| Constant-Dollar Analysis | |
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| Actual-Dollar Analysis | |
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| Mixed-Dollar Analysis | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Evaluating Business And Engineering Assets | |
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| Present-Worth Analysis | |
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| Loan versus Project Cash Flows | |
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| Initial Project Screening Methods | |
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| Benefits and Flaws of Payback Screening | |
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| Discounted-Payback Period | |
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| Present-Worth Analysis | |
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| Net-Present-Worth Criterion | |
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| Guidelines for Selecting a MARR | |
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| Meaning of Net Present Worth | |
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| Net Future Worth and Project Balance Diagram | |
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| Capitalized-Equivalent Method | |
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| Methods to Compare Mutually Exclusive Alternatives | |
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| Doing Nothing Is a Decision Option | |
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| Service Projects versus Revenue Projects | |
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| Analysis Period Equals Project Lives | |
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| Analysis Period Differs from Project Lives | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Annual-Equivalence Analysis | |
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| Annual-Equivalent Worth Criterion | |
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| Benefits of AE Analysis | |
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| Capital (Ownership) Costs versus Operating Costs | |
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| Applying Annual-Worth Analysis | |
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| Unit-Profit or Unit-Cost Calculation | |
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| Make-or-Buy Decision | |
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| Comparing Mutually Exclusive Projects | |
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| Analysis Period Equals Project Lives | |
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| Analysis Period Differs from Project Lives | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Rate-of-Return Analysis | |
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| Rate of Return | |
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| Return on Investment | |
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| Return on Invested Capital | |
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| Methods for Finding Rate of Return | |
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| Simple versus Nonsimple Investments | |
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| Computational Methods | |
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| Internal-Rate-of-Return Criterion | |
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| Relationship to the PW Analysis | |
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| Decision Rule for Simple Investments | |
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| Decision Rule for Nonsimple Investments | |
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| Incremental Analysis for Comparing Mutually Exclusive Alternatives | |
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| Flaws in Project Ranking by IRR | |
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| Incremental-Investment Analysis | |
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| Handling Unequal Service Lives | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Resolution of Multiple Rates of Return | |
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| Net-Investment Test | |
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| The Need for an External Interest Rate | |
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| Calculation of Return on Invested Capital for Mixed Investments | |
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| Benefit-Cost Analysis | |
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| Evaluation of Public Projects | |
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| Valuation of Benefits and Costs | |
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| Users' Benefits | |
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| Sponsor's Costs | |
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| Social Discount Rate | |
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| Benefit-Cost Analysis | |
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| Definition of Benefit-Cost Ratio | |
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| Incremental B/C-Ratio Analysis | |
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| Profitability Index | |
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| Definition of Profitability Index | |
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| Incremental PI Ratio for Mutually Exclusive Alternatives | |
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| Highway Benefit-Cost Analysis | |
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| Define the Base Case and the Proposed Alternatives | |
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| Highway User Benefits | |
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| Sponsors' Costs | |
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| Illustrating Case Example | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Development Of Project Cash Flows | |
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| Accounting for Depreciation and Income Taxes | |
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| Accounting Depreciation | |
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| Depreciable Property | |
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| Cost as Basis | |
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| Useful Life and Salvage Value | |
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| Depreciation Methods: Book and Tax Depreciation | |
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| Book Depreciation Methods | |
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| Straight-Line Method | |
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| Declining-Balance Method | |
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| Units-of-Production Method | |
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| Tax Depreciation Methods | |
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| MACRS Recovery Periods | |
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| MACRS Depreciation: Personal Property | |
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| MACRS Depreciation: Real Property | |
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| Corporate Taxes | |
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| How to Determine "Accounting Profit" | |
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| U.S. Corporate Income Tax Rates | |
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| Gain Taxes on Asset Disposals | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Project Cash-Flow Analysis | |
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| Understanding Project Cost Elements | |
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| Classifying Costs for Manufacturing Environments | |
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| Classifying Costs for Financial Statements | |
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| Classifying Costs for Predicting Cost Behavior | |
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| Why Do We Need to Use Cash Flows in Economic Analysis? | |
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| Income-Tax Rate to Be Used in Project Evaluation | |
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| Incremental Cash Flows from Undertaking a Project | |
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| Operating Activities | |
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| Investing Activities | |
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| Financing Activities | |
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| Developing Project Cash Flow Statements | |
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| When Projects Require Only Operating and Investing Activities | |
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| When Projects Are Financed with Borrowed Funds | |
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| Effects of Inflation on Project Cash Flows | |
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| Depreciation Allowance under Inflation | |
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| Handling Multiple Inflation Rates | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Handling Project Uncertainty | |
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| Origins of Project Risk | |
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| Methods of Describing Project Risk | |
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| Sensitivity Analysis | |
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| Sensitivity Analysis for Mutually Exclusive Alternatives | |
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| Break-Even Analysis | |
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| Scenario Analysis | |
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| Probabilistic Cash Flow Analysis | |
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| Including Risk in Investment Evaluation | |
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| Aggregating Risk over Time | |
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| Estimating Risky Cash Flows | |
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| Considering the Project Risk by Discount Rate | |
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| Determining the Company Cost of Capital | |
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| Project Cost of Capital: Risk-Adjusted Discount Rate Approach | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Special Topics In Engineering Economic | |
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| Replacement Decisions | |
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| Replacement-Analysis Fundamentals | |
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| Basic Concepts and Terminology | |
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| Approaches for Comparing Defender and Challenger | |
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| Economic Service Life | |
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| Replacement Analysis when the Required Service Period is Long | |
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| Required Assumptions and Decision Frameworks | |
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| Handling Unequal Service Life Problems in Replacement Analysis | |
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| Replacement Strategies under the Infinite Planning Horizon | |
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| Replacement Analysis with Tax Considerations | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Understanding Financial Statements | |
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| Accounting: The Basis of Decision Making | |
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| Financial Status for Businesses | |
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| The Balance Sheet | |
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| The Income Statement | |
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| The Cash-Flow Statement | |
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| Using Ratios to Make Business Decisions | |
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| Debt Management Analysis | |
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| Liquidity Analysis | |
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| Asset Management Analysis | |
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| Profitability Analysis | |
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| Market-Value | |
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| Limitations of Financial Ratios in Business Decisions | |
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| Where We Get the Most Up-to-Date Financial Information | |
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| Principle of Investing in Financial Assets | |
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| Trade-Off between Risk and Reward | |
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| Broader Diversification Reduces Risk | |
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| Broader Diversification Increases Expected Return | |
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| Summary | |
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| Self-Test Questions | |
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| Problems | |
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| Self-Test Questions with Answers | |
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| Interest Factors for Discrete Compounding | |
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| How to Read the Cumulative Standardized Normal Distribution Function | |