Description
Book SynopsisTable of Contents1 An Overview of Engineering Economic Analysis 1
1.1 Time Value of Money 2
1.2 Engineering Economy Principles 5
1.3 Economic Justification of Capital Investments 8
2 Time Value of Money Calculations 15
2.1 Cash Flow Diagrams 16
2.2 Single Cash Flows 19
2.3 Multiple Cash Flows: Irregular Cash Flows 27
2.4 Multiple Cash Flows: Uniform Series of Cash Flows 31
2.5 Multiple Cash Flows: Gradient Series of Cash Flows 38
2.6 Multiple Cash Flows: Geometric Series of Cash Flows 42
2.7 Compounding Frequency 46
3 Equivalence, Loans, and Bonds 59
3.1 Equivalence 60
3.2 Interest Payments and Principal Payments 65
3.3 Bond Investments 70
3.4 Variable Interest Rates 73
4 Present Worth 76
4.1 Comparing Alternatives 77
4.2 Present Worth Calculations 81
4.3 Benefit-Cost Analysis 87
4.4 Discounted Payback Period 99
4.5 Capitalized Worth 106
5 Annual Worth and Future Worth 113
5.1 Annual Worth 114
5.2 Future Worth 119
6 Rate of Return 128
6.1 Internal Rate of Return Calculations 130
6.2 External Rate of Return Calculations 137
7 Replacement Analysis 144
7.1 Cash Flow and Opportunity Cost Approaches to Replacement Analysis 145
7.2 Optimum Replacement Interval 150
8 Depreciation 155
8.1 Depreciation in Economic Analysis 156
8.2 Straight-Line and Declining Balance Depreciation Methods 158
8.3 Modified Accelerated Cost Recovery System (MACRS) 165
8.4 MACRS with Bonus Depreciation 171
9 Income Taxes 175
9.1 Corporate Income-Tax Rates 177
9.2 After-Tax Analysis Using Retained Earnings (No Borrowing) 180
9.3 After-Tax Analysis Using Borrowed Capital 188
9.4 Leasing Versus Purchasing Equipment 194
9.5 After-Tax Analysis with Bonus Depreciation 196
9.6 After-Tax Analysis with a Section 179 Expense Deduction 198
10 Inflation 203
10.1 The Meaning and Measure of Inflation 204
10.2 Before-Tax Analysis 208
10.3 After-Tax Analysis 211
10.4 After-Tax Analysis with Borrowed Capital 213
11 Break-Even, Sensitivity, and Risk Analysis 219
11.1 Break-Even Analysis 221
11.2 Sensitivity Analysis 225
11.3 Risk Analysis 231
12 Capital Budgeting 245
12.1 The Classical Capital Budgeting Problem 246
12.2 Capital Budgeting Problem with Indivisible Investments 249
12.3 Capital Budgeting Problem with Divisible Investments 254
13 Obtaining and Estimating Cash Flows 259
13.1 Cost Terminology 261
13.2 Cost Estimation 280
13.3 General Accounting Principles 285
13.4 Cost Accounting Principles 297
13.5 Economic Value Added 303
Appendix A 310
Appendix B 345
Index 349
Problems P1
