Fundamentals of Engineering Economic Analysis

Fundamentals of Engineering Economic Analysis offers a powerful, visually-rich approach to the subject—delivering streamlined yet rigorous coverage of the use of economic analysis techniques in engineering design. This award-winning textbook provides an impressive array of pedagogical tools to maximize student engagement and comprehension, including learning objectives, key term definitions, comprehensive case studies, classroom discussion questions, and challenging practice problems. Clear, topically—organized chapters guide students from fundamental concepts of borrowing, lending, investing, and time value of money, to more complex topics such as capitalized and future worth, external rate of return, deprecation, and after-tax economic analysis.

This fully-updated second edition features substantial new and revised content that has been thoroughly re-designed to support different learning and teaching styles. Numerous real-world vignettes demonstrate how students will use economics as practicing engineers, while plentiful illustrations, such as cash flow diagrams, reinforce student understanding of underlying concepts. Extensive digital resources now provide an immersive interactive learning environment, enabling students to use integrated tools such as Excel. The addition of the WileyPLUS platform provides tutorials, videos, animations, a complete library of Excel video lessons, and much more.

1 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

The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

The Used, Rental and eBook copies of this book are not guaranteed to include any supplemental materials. Typically, only the book itself is included. This is true even if the title states it includes any access cards, study guides, lab manuals, CDs, etc.