LEVEL ONE THIS IS HOW IT ALL STARTS Chapter 1 Foundations of Engineering Economy 1.1 Why Engineering Economy Is Important to Engineers (and Other Professionals) 1.2 Role of Engineering Economy in Decision Making 1.3 Performing an Engineering Economy Study 1.4 Interest Rate and Rate of Return 1.5 Equivalence 1.6 Simple and Compound Interest 1.7 Terminology and Symbols 1.8 Introduction to Solution by Computer 1.9 Minimum Attractive Rate of Return 1.10 Cash Flows: Their Estimation and Diagramming 1.11 Rule of 72: Estimating Doubling Time and Interest Rate 1.12 Spreadsheet Application--Simple and Compound Interest, and Changing Cash Flow Estimates Additional Examples Chapter Summary Problems FE Review Problems Extended Exercise--Effects of Compound Interest Case Stndy--Describing Alternatives for Producing Refrigerator Shells Chapter 2 Factors: How Time and Interest Affect Money 2.1 Single-Payment Factors (F/P and P/F) 2.2 Uniform-Series Present Worth Factor and Capital Recovery Factor (PlA and A/P) 2.3 Sinking Fund Factor and Uniform-Series Compound Amount Factor (A/F and F/A) 2.4 Interpolation in Interest Tables 2.5 Arithmetic Gradient Factors (P/G and A/G) 2.6 Geometric Gradient Series Factors 2.7 Determination of an Unknown Interest Rate 2.8 Determination of Unknown Number of Years 2.9 Spreadsheet Application--Basic Sensitivity Analysis Additional Example Chapter Summary Problems FE Review Problems Case Study--What a Difference the Years and Compound Interest Can Make Chapter 3 Combining Factors 3.1 Calculations for Uniform Series That Are Shifted 3.2 Calculations Involving Uniform-Series and Randomly Placed Single Amounts 3.3 Calculations for Shifted Gradients 3.4 Shifted Decreasing Arithmetic Gradients 3.5 Spreadsheet Application--Using Different Functions Additional Example Chapter Summary Problems FE Review Problems Extended Exercise--Preserving Land for Public Use Chapter 4 Nominal and Effective Interest Rates 4.1 Nominal and Effective Interest Rate Statements 4.2 Effective Annual Interest Rates 4.3 Effective Interest Rates for Any Time Period 4.4 Equivalence Relations: Comparing Payment Period and Compounding Period Lengths (PP versus CP) 4.5 Equivalence Relations: Single Amounts with PP -- CP 4.6 Equivalence Relations: Series with PP --> CP 4.7 Equivalence Relations: Single Amounts and Series with PP < CP 4.8 Effective Interest Rate for Continuous Compounding 4.9 Interest Rates That Vary over Time Chapter Summary Problems FE Review Problems Case Study---Financing a House LEVEL TWO TOOLS FOR EVALUATING ALTERNATIVES Chapter 5 Present Worth Analysis 5.1 Formulating Mutually Exclusive Alternatives 5.2 Present Worth Analysis of Equal-Life Alternatives 5.3 Present Worth Analysis of Different-Life Alternatives 5.4 Future Worth Analysis 5.5 Capitalized Cost Calculation and Analysis 5.6 Payback Period Analysis 5.7 Life-Cycle Cost 5.8 Present Worth of Bonds 5.9 Spreadsheet Applications--PW Analysis and Payback Period Chapter Summary Problems FE Review Problems Extended Exercise---Evaluation of Social Security Retirement Estimates Case Study--Payback Evaluation of Ultralow-Fhish Toilet Program Chapter 6 Annual Worth Analysis 6.1 Advantages and Uses of Annual Worth Analysis 6.2 Calculation of Capital Recovery and AW Values 6.3 Evaluating Alternatives by Annual Worth Analysis 6.4 AW of a Permanent Investment Chapter Summary Problems FE Review Problems Case Study The Changing Scene of all Annual Worth Analysis Chapter 7 Rate of Return Analysis: Single Alternative 7.1 Interpretation of a Rate of Return Value 7.2 Rate of Return Calculation Using a PW or AW Equation 7.3 Cautions When Using the ROR Method 7.4 Multiple Rate of Return Values 7.5 Composite Rate of Return: Removing Multiple i* Values 7.6 Rate of Return of a Bond Investment Chapter Summary Problems FE Review Problems Extended Exercise 1--The Cost of a Poor Credit Rating Extended Exercise 2---When Is It Best to Sell a Business? Case Study---Bob Learns About Multiple Rates of Return Chapter 8 Rate of Return Analysis: Multiple Alternatives 8.1 Why Incremental Analysis is Necessary 8.2 Calculation of Incremental Cash Flows for ROR Analysis 8.3 Interpretation of Rate of Return on the Extra Investment 8.4 Rate of Return Evaluation Using PW: Incremental and Breakeven 8;5 Rate of Return Evaluation Using AW 8.6 Incremental ROR Analysis of Multiple, Mutually Exclusive Alternatives 8.7 Spreadsheet Application--PW, AW, and ROR Analyses All in One Chapter Summary Problems FE Review Problems Extended Exercise---Incremental ROR Analysis When Estimated Alternative Lives are Uncertain Case Study 1---So Many Options. Can a New Engineering Graduate Help His Father? Case Study 2--PW Analysis When Multiple Interest Rates Are Present Chapter 9 Benefit/Cost Analysis and Public Sector Economics 9.1 Public Sector Projects 9.2 Benefit/Cost Analysis of a Single Project 9.3 Alternative Selection Using Incremental B/C Analysis 9.4 Incremental B/C Analysis of Multiple, Mutually Exclusive Alternatives Chapter Summary Problems FE Review Problems Extended Exercise---Costs to Provide Ladder Truck Service for Fire Protection Case Study--Freeway Lighting Chapter 10 Making Choices: The Method, MARR, and Multiple Attributes 10.1 Comparing Mutually Exclusive Alternatives by Different Evaluation Methods 10.2 MARR Relative to the Cost of Capital 10.3 Debt-Equity Mix and Weighted Average Cost of Capital 10.4 Determination of the Cost of Debt Capital 10.5 Determination of the Cost of Equity Capital and the MARR 10.6 Effect of Debt-Equity Mix on Investment Risk 10.7 Multiple Attribute Analysis: Identification and Importance of Each Attribute 10.8 Evaluation Measure for Multiple Attributes Chapter Summary Problems Extended Exercise--Emphasizing the Right Things Case Study--Which Way to Go~--Debt or Equity Financing? LEVEL THREE MAKING DECISIONS ON REAL-WORLD PROJEctS Chapter 11 Replacement and Retention Decisions 1 l.l Basics of the Replacement Study 11.2 Economic Service Life 11.3 Performing a Replacement Study 11.4 Additional Considerations in a Replacement Study, 11.5 Replacement Study over a Specified Study Period Chapter Summary Problems FE Review Problems Extended Exercise-Economic Service Life Under Varying Conditions Case Study--Replacement Analysis for Quarry Equipment Chapter 12 Selection {rom Independent Projects Under Budget Limitation 12,1 An Overview of Capital Rationing Among Projects 12.2 Capital Rationing Using PW Analysis of Equal-Life Projects Capital Rationing Using PW Analysis of Unequal-Life Projects Capital Budgeting Problem Formulation Using Linear Programming Chapter Summary Problems Case Study--IAfelong Engineering Education in a Web Environment Chapter 13 Breakeven Analysis 13.1 Breakeven Analysis for a Single Project 13.2 Breakeven Analysis Between Two Alternatives 13.3 Spreadsheet Application--Using Excel's SOLVER for Breakeven Analysis Chapter Summary Problems Case Study--Water Treatment Plant Process Costs LEVEL FOUR ROUNDING OUT THE STUDY Chapter 14 Effects of Inflation 14.1 Understanding the Impact of Inflation 14.2 Present Worth Calculations Adjusted for Inflation 14.3 Future Worth Calculations Adjusted for Inflation 14.4 Capital Recovery Calculations Adjusted for Inflation Chapter Summary Problems FE Review Problems Extended Exercise--Fixed-Income Investments versus the Forces of Inflation Chapter 15 Cost Estimation and Indirect Cost Allocation 15.1 Understanding How Cost Estimation Is Accomplished 15.2 Cost Indexes 15.3 Cost Estimating Relationships: Cost-Capacity Equations 15.4 Cost Estimating Relationships: Factor Method 15.5 Traditional Indirect Cost Rates and Allocation 15.6 Activity-Based Costing (ABC) for Indirect Costs Chapter Summary Problems FE Review Problems Case Study--Total Cost Estimates for Optimizing Coagulant Dosage Case Study--Indirect Cost Comparison of Medical Equipment: Sterilization Unit Chapter 16 Depreciation Methods 16.1 Depreciation Terminology 16.2 Straight Line (SL) Depreciation 16.3 Declining Balance (DB) and Double Declining Balance (DDB) Depreciation 16.4 Modified Accelerated Cost Recovery System (MACRS) 16.5 Determining the MACRS Recovery Period 16.6 Depletion Methods Chapter Summary Problems FE Review Problems 16A.1 Sum-of-Year Digits (SYD) Depreciation 16A.2 Switching Between Depreciation Methods 16A.3 Determination of MACRS Rates Appendix Problems Chapter 17 After-Tax Economic Analysis 17.1 Income Tax Terminology and Relations for Corporations (and Individuals) 17.2 Before-Tax and After-Tax Cash Flow 17.3 Effect on Taxes of Different Depreciation Methods and Recovery Periods 17.4 Depreciation Recapture and Capital Gains (Losses): for Corporations 17.5 After-Tax PW, AW, and ROR Evaluation 17.6 Spreadsheet Applications--After-Tax Incremental ROR Analysis 17.7 After-Tax Replacement Study 17.8 After-Tax Value-Added Analysis Chapter Summary Problems Case Study--After-Tax Evaluation of Debt and Equity Financing Chapter 18 Formalized Sensitivity Analysis and Expected Value Decisions5 18.1 Determining Sensitivity to Parameter Variation 18.2 Formalized Sensitivity Analysis Using Three Estimates 18.3 Economic Variability and the Expected Value 18.4 Expected Value Computations for Alternatives 18.5 Staged Evaluation of Alternatives Using a Decision Tree Chapter Summary Problems Extended Exercise--Looking at Alternatives from Different Angles Case Study--Sensitivity Analysis of Public Sector Projects--Water Supply Plans Chapter 19 More on Variation and Decision Making Under Risk 19.1 Interpretation of Certainty, Risk, and Uncertainty 19.2 Elements Important to Decision Making Under Risk 19.3 Random Samples 19.4 Expected Value and Standard Deviation 19.5 Monte Carlo Sampling and Simulation Analysis Additional Examples Chapter Summary Problems Extended Exercise---Using Simulation and the Excel RNG for Sensitivity Analysis Appendix A Using Spreadsheets and Microsoft Excel~ A. 1 Introduction to Using Excel A.2 Organization (Layout) of the Spreadsheet A.3 Excel Functions Important to Engineering Economy (alphabetical order) A.4 SOLVER--An Excel Tool for Breakeven and "What If?." Analysis A.5 List of Excel Financial Functions A.6 Error Messages Appendix B Basics of Accounting Reports and Business Ratios B.1 The Balance Sheet B.2 Income Statement and Cost of Goods Sold Statement B.3 Business Ratios Problems Appendix C Final Answers to Selected End-of-Chapter Problems Bibliography 700 Compound Interest Factor Tables 702 Index 731
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