Engineering Economy

Note: Each chapter concludes with a Summary. PART I. BASIC CONCEPTS AND TOOLS; CHAPTER 1. MAKING ECONOMIC DECISIONS; 1.1. What Is Engineering Economy; 1.2. Principles for Decision Making; 1.3. The Decision Making Process; 1.4. The Environment for Decisions; 1.5. The Role of Engineering Economy; 1.6. Operational Economics; CHAPTER 2. THE TIME VALUE OF MONEY; 2.1. What is Interest?; 2.2. Simple vs. Compound Interest; 2.3. Cash Flow Diagrams; 2.4. Equivalence for 4 loans; 2.5. Limits on Equivalence; 2.6. Compounding Periods Shorter than a Year; CHAPTER 3. EQUIVALENCE-A FACTOR APPROACH; 3.1. Definitions and Assumptions; 3.2. Tables of Engineering Economy Factors; 3.3. Single Payment Factors (Ps and Fs); 3.4. Uniform Flows; 3.5. Combining Factors; 3.6. Arithmetic Gradients; 3.7. Geometric Gradients; Appendix 3A: Continuous Flow and Continuous Compounding; CHAPTER 4. SPREADSHEETS AND ECONOMIC ANALYSIS; 4.1. Using Spreadsheets for Economic Analysis; 4.2. Spreadsheet Modeling; 4.3. Financial Functions in Spreadsheets; 4.4. Examples Show Spreadsheet Can Be More Realistic; 4.5. Using Spreadsheets to Get a Project Funded; PART TWO: ANALYZING A PROJECT; CHAPTER 5. PRESENT WORTH; 5.1. The Present Worth Measure; 5.2. Examples of When to Use Present Worth; 5.3 Rolling Back Irregular Cash Flows for PW Calculations; 5.4. Salvage Values; 5.5. Capitalized Cost and Perpetual Life; 5.6. Staged Projects; 5.7 Cost of Underutilized Capacity; 5.8. Spreadsheets and Shorter Periods; 5.9. Spreadsheets and More Exact Models; CHAPTER 6. EQUIVALENT ANNUAL WORTH; 6.1. The Equivalent Annual Worth Measure; 6.2. Assumptions and Sign Conventions; 6.3. Examples of Annual Evaluations; 6.4. Finding the EAC of Irregular Cash Flows; 6.5. EAC Formulas for Salvage Values and Working Capital; 6.6. Perpetual Life; 6.7. Repeated Renewals; 6.8. Spreadsheets and Analyzing Loan Repayments; CHAPTER 7. RATE OF RETURN; 7.1. The Internal Rate of Return; 7.2. Assumptions; 7.3. Finding the IRR; 7.4. Loans and Leases; 7.5. Spreadsheets and the IRR; 7.6. Multiple Sign Changes; 7.7. Project Balances over Time; 7.8. Modified Internal Rate of Return (MIRR); CHAPTER 8. BENEFIT/COST RATIOS AND OTHER MEASURES; 8.1. Measures of Economic Attractiveness; 8.2. Benefit/Cost Ratio; 8.3. Present Worth Indexes; 8.4. Future Worth; 8.5. Payback Period; 8.6. Discounted Payback; 8.7. Breakeven Volume; PART THREE: COMPARING ALTERNATIVES AND PROJECTS; Introduction to mutually exclusive and constrained budget problems; CHAPTER 9. MUTUALLY EXCLUSIVE ALTERNATIVES; 9.1. Applying Engineering Economy to Engineering Design; 9.2. Key Assumption Is the Interest Rate or Minimum; 9.3. Comparing Alternatives with Lives of the Same Length; 9.4. PWs and Explicitly Comparing Different-Length Lives; 9.5. EAWs and EACs and Implicity Comparing Different-Length Lives; 9.6. Using EAC for Different-Length Lives Is a Robust Approach; 9.7. B/C and IRR Comparisons of Mutually Exclusive Alternatives Require Incremental Analysis; 9.8. Defender / Challenger Analysis; 9.9. PW, EAW, and IRR Have the Same Reinvestment Assumption; 9.10. Using Spreadsheet GOAL SEEK Tool to Calculate; CHAPTER 10. REPLACEMENT ANALYSIS; 10.1. Why Is Equipment Replaced, Retired, or Augmented?; 10.2. Old and New Are Mutually Exclusive; 10.3. Sunk Costs, Risks, and Cost Savings vs. Profit Making; 10.4. Optimal Challengers; 10.5. Optimal Defenders; 10.6. Optimal Capacity Problems; 10.7 Estimating Future Challengers; 10.8. Replacement and Repair Models; CHAPTER 11. CONSTRAINED PROJECT SELECTION; 11.1. The Constrained Project Selection Problem; 11.2. Ranking Projects; 11.3. Determining the Minimum Attractive Rate of Return; 11.4. A Theoretically Optimal Approach for Determining the Capital Budget; 11.5. Capital Limits in the Real World; 11.6. Matching Assumptions to the Real World; 11.7. Present Worth Indexes and Benefit/Cost Ratios; 11.8. Using the SORT Spreadsheet Tool; Appendix 11A: Mathematical Programming and Spreadsheets; PART FOUR: ENHANCEMENTS FOR THE REAL WORLD; CHAPTER 12. DEPRECIATION; 12.1. Introduction; 12.2. Basic Depreciation Methods; 12.3. Accelerated Cost Recovery; 12.4. Gains and Losses on Sales and Recaptured Depreciation; 12.5. Optimal Depreciation Strategies; 12.6. PW of a Depreciation Schedule; 12.7. Depletion of Resources; 12.8. Section 179 Deduction; 12.9. Spreadsheet Functions for Depreciation; CHAPTER 13. INCOME TAXES; 13.1. Principles of Income Taxes; 13.2. Progressive Marginal Tax Rates; 13.3. Finding Taxable Income when Including Depreciation; 13.4. Calculating After-Fax Cash Flows and EACs using Tables or Spreadsheets; 13.5. Calculating After-Tax Cash Flows and EACs using Formulas; 13.6. Investment Tax Credits (ITC) and Capital Gains; 13.7. Interest Deductions and an After-Tax IRR; Appendix 13A: Personal Income Taxes; CHAPTER 14. PUBLIC SECTOR ENGINEERING ECONOMY; 14.1. Defining Benefits, Disbenefits, and Costs; 14.2. Why are Public-Sector Problems Difficult?; 14.3. Correct Methods and Interest Rates; 14.4. Whose Point of View?; 14.5. Allocating Costs to Benefit Recipients; 14.6. Valuing the Benefits of Public Projects; 14.7. Cost Effectiveness; CHAPTER 15. INFLATION; 15.1. Defining and Measuring Inflation and Deflation; 15.2. Consistent Assumptions for Interest Rates and Cash Flow Estimates; 15.3. Solving for PW or EAC when Including Inflation; 15.4. Inflation Examples with Multiple Inflation Rates; 15.5. LEASES AND OTHER PREPAID EXPENSES; 15.6. Depreciation and Loan Payments; 15.7. Inflation Calculations Based on the Equivalent Discount Rate; PART FIVE: DECISION MAKING TOOLS; CHAPTER 16. ESTIMATING CASH FLOWS; 16.1. Introduction Early Project Decisions; 16.2. Cash Flow Estimating and Life-Cycle Stages; 16.3. Cash Flow Estimating Standards; 16.4. Design Criteria and Specifications; 16.5. Modeling the Base Case; 16.6. Using Indexes for an Order-of-Magnitude Estimate; 16.7. Using Capacity Functions for Order-of-Magnitude Estimates; 16.8. Using Growth Curves; 16.9. Using Learning Curves; 16.10. Using Factor Estimates; CHAPTER 17. SENSITIVITY ANALYSIS; 17.1. What Is Sensitivity Analysis?; 17.2. Uncertain Data and Its Impact; 17.3. Techniques for Sensitivity Analysis; 17.4. Spiderplots; 17.5. Constructing a Spiderplot; 17.6. Multiple Alternatives; 17.7. Sensitivity Analysis with Multiple Variables; CHAPTER 18. UNCERTAINTY AND PROBABILITY; 18.1. Probabilities; 18.2. Computing Expected Values; 18.3. Choosing Alternatives Using Expected Values; 18.4. Economic Decision Trees; 18.5. Risk; 18.6. Risk/Return Tradeoffs; 18.7. Probability Distributions for Economic Outcomes; CHAPTER 19. MULTIPLE OBJECTIVES; 19.1. Multiple Attributes; 19.2. The Process of Evaluating Multiple Objectives; 19.3. Identifying the Attributes; 19.4. Evaluating the Attributes; 19.5. Graphical Techniques; 19.6. Numerical Scales for Evaluation; 19.7. Additive Models; 19.8. Hierarchical Attributes and Objectives; APPENDIXES; A. ACCOUNTING; A.1. The Role of Accounting; A.2. General Accounting; A.3. The Balance Sheet; A.4. The Income Statement; A.5. Traditional Cost Accounting; A.6. Activity Based Costs (ABC); B. END-OF-PERIOD COMPOUND INTEREST TABLES