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Engineering Economy

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ISBN-10: 0133821935

ISBN-13: 9780133821932

Edition: 10th 1997

Authors: E. Paul DeGarmo, James A. Bontadelli

List price: $93.00
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Book details

List price: $93.00
Edition: 10th
Copyright year: 1997
Publisher: Prentice Hall PTR
Binding: Hardcover
Pages: 647
Size: 7.80" wide x 9.57" long
Weight: 2.596
Language: English

Preface
Background and Tools of Engineering Economy
Introduction to Engineering Economy
Introduction
Origins of Engineering Economy
What Are the Principles of Engineering Economy?
Engineering Economy and the Design Process
Accounting and Engineering Economy Studies
Overview of the Book
Summary
Problems
Cost Concepts and the Economic Environment
Introduction
Cost Terminology
The General Economic Environment
Cost-Driven Design Optimization
Present Economy Studies
Summary
References
Problems
Principles of Money-Time Relationships
Introduction
Why Consider Return to Capital?
The Origins of Interest
Simple Interest
Compound Interest
The Concept of Equivalence
Notation and Cash Flow Diagrams/Tables
Interest Formulas Relating Present and Future Equivalent Values of Single Cash Flows
Interest Formulas Relating a Uniform Series (Annuity) to Its Present and Future Equivalent Values
Interest Formulas for Discrete Compounding and Discrete Cash Flows
Deferred Annuities (Uniform Series)
Equivalence Calculations Involving Multiple Interest Formulas
Interest Formulas Relating a Uniform Gradient of Cash Flows to Its Annual and Present Equivalents
Interest Formulas Relating a Geometric Sequence of Cash Flows to Its Present and Annual Equivalents
Interest Rates That Vary with Time
Nominal and Effective Interest Rates
Interest Problems with Compounding More Often Than Once per Year
Interest Problems with Cash Flows Less Often Than Compounding Periods
Interest Formulas for Continuous Compounding and Discrete Cash Flows
Interest Formulas for Continuous Compounding and Continuous Cash Flows
Additional Solved Problems
Spreadsheet Applications
Summary
References
Problems
Applications of Engineering Economy
Applications of Money-Time Relationships
Introduction
Determining the Minimum Attractive Rate of Return
The Present Worth Method
The Future Worth Method
The Annual Worth Method
The Internal Rate of Return Method
The External Rate of Return Method
The Payback (Payout) Period Method
Investment Balance Diagrams
An Example of a Proposed Capital Investment to Reduce Costs
An Example of a Large Industrial Investment Opportunity
Spreadsheet Applications
Summary
References
Problems
The Multiple Rate of Return Problem with the IRR Method
Comparing Alternatives
Introduction
Basic Concepts for Comparing Alternatives
The Study (Analysis) Period
Case 1: Useful Lives Are Equal to the Study Period
Case 2: Useful Lives Are Different Among the Alternatives
Comparison of Alternatives Using the Capitalized Worth Method
Defining Mutually Exclusive Investment Alternatives in Terms of Combinations of Projects
Spreadsheet Applications
Summary
References
Problems
Evaluating Projects with the Benefit/Cost Ratio Method
Introduction
Perspective and Terminology for Analyzing Public Projects
Self-Liquidating Projects
Multiple-Purpose Projects
Difficulties in Evaluating Public Sector Projects
What Interest Rate Should Be Used for Public Projects?
The Benefit/Cost Ratio Method
Evaluating Independent Projects by B/C Ratios
Comparison of Mutually Exclusive Projects by B/C Ratios
Criticisms and Shortcomings of the Benefit/Cost Ratio Method
Spreadsheet Applications
Summary
References
Problems
Depreciation and Income Taxes
Introduction
Depreciation Concepts and Terminology
The Classical (Historical) Depreciation Methods
The Modified Accelerated Cost Recovery System
A Comprehensive Depreciation Example
Depletion
Introduction to Income Taxes
The Effective (Marginal) Corporate Income Tax Rate
Gain (Loss) on the Disposal of an Asset
General Procedure for Making After-Tax Economic Analyses
Illustration of Computations of ATCFs
After-Tax Analyses That Include Specific Financing Arrangements
The After-Tax Effect of Depletion Allowances
Summary
References
Problems
Estimating Cash Flows
Introduction
An Integrated Approach
Selected Estimating Techniques (Models)
Estimating Total Product Costs and Selling Price
Estimating Cash Flows for a Typical Small Project
Developing Cash Flows (A Case Study)
Summary
References
Problems
Inflation and Price Changes
General Price Inflation
Terminology and Basic Concepts
Differential Price Inflation or Deflation
Application Strategy
A Comprehensive Example
Foreign Exchange Rates and Purchasing Power Concepts
Spreadsheet Applications
Summary
References
Problems
Dealing with Uncertainty
Introduction
What Are Risk, Uncertainty, and Sensitivity?
Sources of Uncertainty
Common Nonprobabilistic Methods for Dealing with Uncertainty
Breakeven Analysis
Sensitivity Analysis
Analyzing a Proposed Business Venture
Optimistic-Pessimistic Estimates
Risk-Adjusted Minimum Attractive Rates of Return
Reduction of Useful Life
Spreadsheet Applications
Summary
References
Problems
Special Topics in Engineering Economy
Replacement Analysis
Introduction
Reasons for Replacement Analysis
Factors That Must Be Considered in Replacement Studies
A Typical Replacement Problem
A Decision Roadmap for Replacement Analysis
Determining the Economic Life of a New Asset (Challenger)
Determining the Economic Life of a Defender
Comparisons in Which the Defender's Useful Life Differs from That of the Challenger
Retirement Without Replacement (Abandonment)
A Comprehensive Example
Spreadsheet Applications
Summary
References
Problems
Capital Financing and Allocation
Introduction
Capital Financing
Financing with Debt Capital
Financing with Equity Capital
Leasing as a Source of Capital
Capital Allocation
Allocating Capital Among Independent Projects
Linear Programming Formulations of Capital Allocation Problems
An Overview of Corporate Capital Allocation Policy and Procedures
Summary
References
Problems
Engineering Economy Studies in Investor-Owned Utilities
Background
General Characteristics of Investor-Owned Utilities
General Concepts of Utility Economy Studies
Methods of Engineering Economy for Investor-Owned Utility Projects
Development of the Revenue Requirement Method
Assumptions of the Revenue Requirement Method
Utility Rate Regulation
Flow-Through and Normalized Accounting
Illustration of the Revenue Requirement Method: A Tabular Procedure
Immediate Versus Deferred Investment
Revenue Requirement Analysis Under Conditions of Inflation
Summary
References
Problems
Probabilistic Risk Analysis
Introduction
The Distribution of Random Variables
Evaluation of Projects with Discrete Random Variables
Evaluation of Projects with Continuous Random Variables
Evaluation of Uncertainty Using Monte Carlo Simulation
Performing Monte Carlo Simulation with a Computer
Decision Trees
Spreadsheet Applications
Summary
References
Problems
Appendixes
Appendix
Accounting and Its Relationship to Engineering Economy
Abbreviations and Notation
Interest and Annuity Tables for Discrete Compounding
Interest and Annuity Tables for Continuous Compounding
Standardized Normal Distribution Function
Selected References
Answers to Selected Even-Numbered Problems
Index