Engineering Economic Analysis

COMPOUND INTEREST EQUATIONS; ECONOMIC CRITERIA; PREFACE; A SEA OF PROBLEMS; Simple Problems; Intermediate Problems; Complex Problems; THE ROLE OF ENGINEERING ECONOMIC ANALYSIS; Examples of Engineering Economic Analysis; THE DECISION-MAKING PROCESS; Rational Decision Making; Recognize Problem; Define the Goals; Assemble Relevant Data; Identify Feasible Alternatives; Select the Criterion; Construct a Model; Predict Each Alternative's Outcomes; Choose the Best Alternative; Audit the Results; ENGINEERING DECISION MAKING; ENGINEERING COSTS; Fixed, Variable, Marginal, and Average Costs; Sunk Costs; Opportunity Costs; Recurring and Non-recurring Costs; Incremental Costs; Cash Costs versus Book Costs; Life-cycle Costs; COST ESTIMATING; Types of Estimates; Difficulties in Estimation; One-of-a-kind Estimates; Time and Effort Available; Estimator Expertise; ESTIMATING MODELS; Per Unit Model; Segmenting Model; Cost Indexes; Power Sizing Model; Triangulation; Improvement and the Learning Curve; ESTIMATING BENEFITS; CASH FLOW DIAGRAMS; Categories of Cash Flows; Drawing a Cash Flow Diagram; Drawing Cash Flow Diagrams with a Spreadsheet; COMPUTING CASH FLOWS; TIME VALUE OF MONEY; SIMPLE INTEREST; Repaying a Dept; EQUIVALENCE; Difference in Repayment Plans; Equivalence is Dependent on Interest Rate; Application of Equivalence Calculations; SINGLE PAYMENT COMPOUND INTEREST FORMULAS; UNIFORM SERIES COMPOUND INTEREST FORMULAS; RELATIONSHIPS BETWEEN COMPOUND INTEREST FACTORS; Single Payment; Uniform Series; ARITHMETIC GRADIENT; Derivation of Arithmetic Gradient Factors; GEOMETRIC GRADIENT; NOMINAL AND EFFECTIVE INTEREST; CONTINUOUS COMPOUNDING; Single Payment Interest Factors; Uniform Payment Series; Continuous, Uniform Cash Flow; SPREADSHEETS FOR ECONOMIC ANALYSIS; Spreadsheet Annuity Functions; Spreadsheet Block Functions; Basic Graphin Using Spreadsheets; ECONOMIC CRITERIA; APPLYING PRESENT WORTH TECHNIQUES; Useful Lives Equal the Analysis Period; Net Present Worth; Useful Lives Different from the Analyis Period; Infinite Analysis Period--Capitalized Cost; Multiple Alternatives; ASSUMPTIONS IN SOLVING ECONOMIC ANALYSIS PROBLEMS; End-of-year Convention; Viewpoint of Economic Analysis Studies; Sunk Costs; Borrowed Money Viewpoint; Effect of Inflation and Deflation; Income Taxes; Spreadsheets and Present Worth; ANNUAL CASH FLOW CALCULATIONS; Resolving a Present Cost to an Annual Cost; Treatment of Salvage Value; ANNUAL CASH FLOW ANALYSIS; ANALYSIS PERIOD; Analysis Period Equal to Alternative Lives; Analysis Period a Common Multiple of Alternative Lives; Analysis Period for a Continuing Requirement; Infinite Analysis Period; Some Other Analysis Period; USING SPREADSHEETS TO ANALYZE LOANS; Building an Amortization Schedule; How Much to Interest? How much to Principal?; Finding the Balance Due on a Loan; Payoff Debt Sooner by Increasing Payments; INTERNAL RATE OF RETURN; CALCULATING RATE OF RETURN; Plot of NPW vs. Interest Rate ir; RATE OF RETURN ANALYSIS; ANALYSIS PERIOD SPREADSHEETS AND RATE OF RETURN ANALYSIS; Converting a Cash Flow to a Mathematical Equation; CASH FLOW RULE OF SIGNS; Zero Sign Changes; One Sign Change; Two or More Sign Changes; What the Difficulties Mean; EXTERNAL INTEREST RATE; Resolving Multiple Rate of Return Problems; A Further Look at the the Computation of Rate of Return; GRAPHICAL SOLUTIONS; INCREMENTAL RATE OF RETURN ANALYSIS; ELEMENTS IN INCREMENTAL RATE OF RETURN ANALYSIS; Incremental Analysis Where There are Unlimited Alternatives; PRESENT WORTH ANALYSIS WITH BENEFIT-COST GRAPHS; CHOOSING AN ANALYSIS METHOD; SPREADSHEETS AND INCREMENTAL ANALYSIS; FUTURE WORTH ANALYSIS; BENEFIT-COST RATIO ANALYSIS; Continuous Alternatives; PAYBACK PERIOD; SENSITIVITY AND BREAKEVEN ANALYSIS; GRAPHING WITH SPREADSHEETS FOR SENSITIVITY AND BREAKEVEN ANALYSIS; BASIC ASPECTS OF DEPRECIATION; Deterioration and Osolescence; Depreciation and Expenses; Types of Property; Depreciation Calculation Fundamentals; HISTORICAL DEPRECIATION METHODS; Straight Line Depreciation; Sum-of-Years Digits Depreciation; Declining Balance Depreciation; MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS); Cost Basis and Placed in Service Date; Property Class and Recovery Period; Percentage Tables; Where MACRS Percentage Rates Come From; MACRS Method Examples; Comparing MACRS and Historical Methods; DEPRECIATION AND ASSET DISPOSAL; UNIT OF PRODUCTION DEPRECIATION; DEPLETION; Cost Depletion; Percentage Depletion; SPREADSHEETS AND DEPRECIATION; A PARTNER IN THE BUSINESS; CALCULATION OF TAXABLE INCOME; Taxable Income of Individuals; Classification of Business Expenditures; Taxable Income of Business Firms; INCOME TAX RATES; Individual Tax Rates; Corporate Tax Rates; Combined Federal and State Income Taxes; Selecting an Income Tax Rate for Economic Studies; ECONOMIC ANALYSIS TAKING INCOME TAXES INTO ACCOUNT; CAPITAL GAINS AND LOSSES FOR NON-DEPRECIATED ASSETS; Investment Tax Credit; ESTIMATING THE AFTER-TAX RATE OF RETURN; AFTER-TAX CASH FLOWS AND SPREADSHEETS; THE REPLACEMENT PROBLEM; REPLACEMENT ANALYSIS DECISION MAP; WHAT IS THE BASIC COMPARISON?; Minimum Cost Life of the Challenger; Use of Marginal Cost Data; Replacement Analysis Technique no.1; Minimum Cost Life of the Defender; Replacement Analysis Technique no.2; No Defender Marginal Cost Data Available; Replacement Analysis Technique no.3; Repeatability Assumptions Not Acceptable; A Closer Look at Future Challengers; AFTER-TAX REPLACEMENT ANALYSIS; Marginal Costs on an After-Tax Basis; After-Tax Cash Flows for the Challenger; After-Tax Cash Flows for the Defender; Minimum Cost Life Problems; SPREADSHEETS AND AFTER-TAX REPLACEMENT ANALYSIS; MEANING AND EFFECT OF INFLATION; How Does Inflation Happen?; Definitions for Considering Inflation in Engineering Economy; CONSTANT DOLLAR VERSUS THEN-CURRENT DOLLAR ANALYSIS; PRICE CHANGE WITH INDEXES; What is a Price Index?; Composit Versus Commodity Indexes; How to Use Price Indexes in Engineering Economic Analysis; CASH FLOWS THAT INFLATE AT DIFFERENT RATES; DIFFERENT INFLATION RATES PER PERIOD; INFLATION EFFECT ON AFTER-TAX CALCULATIONS; USING SPREADSHEETS FOR INFLATION CALCULATIONS; PRECISE ESTIMATES; A RANGE OF ESTIMATES; PROBABILITY AND RISK; EXPECTED VALUE; DISTRIBUTION OF OUTCOMES; Uniform Distribution; Normal Distribution; Sampling from Any Distribution Using Random Numbers; SIMULATION; Simulation with Spreadsheets; SOURCES OF CAPITAL; Money Generated from the Operation of the Firm; External Sources of Money; Choice of Source of Funds; COST OF FUNDS; Cost of Borrowed Money, Cost of Capital; INVESTMENT OPPORTUNITIES; Opportunity Cost; SELECTING A MINIMUM ATTRACTIVE RATE OF RETURN; ADJUSTING MARR TO ACCOUNT FOR RISK AND UNCERTAINTY; Inflation and the Cost of Borrowed Money; REPRESENTATIVE VALUES OF MARR USED IN INDUSTRY; SPREADSHEETS, CUMULATIVE INVESTMENTS, AND THE OPPORTUNITY COST OF CAPITAL; INVESTMENT OBJECTIVE; VIEWPOINT FOR ANALYSIS; SELECTNG AN INTEREST RATE; THE BENEFIT-COST RATIO; INCREMENTAL BENEFIT-COST ANALYSIS; Elements of the Incremental Benefit-Cost Ratio Method; OTHER EFFECTS OF PUBLIC PROJECTS; Project Financing; Project Duration; Project Politics; CAPITAL EXPENDITURE PROJECT PROPOSALS; Mutually Exclusive Altervatives and Single Project Proposals; Identifying and Rejecting Unattractive Alternatives; Selecting the Best Alternative from Each Project Proposal; RATIONING CAPITAL BY RATE OF RETURN; Significance of the Cutoff Rate of Return; RATIONING CAPITAL BY PRESENT WORTH METHODS; RANKING PROJECT PROPOSALS; CASH FLOW SITUATIONS; ANALYSIS OF A CASH FLOW AS AN INVESTMENT SITUATION; Cash Flow Rule of Signs; Accumulated Cash Flow Sign Test; Algebraic Sum of the Cash Flow; Net Investment Conditions; Application of the Four Test of a Cash Flow; REFERENCES; INDEX; COMPOUND INTEREST TABLES; (Each chapter ends with a Summary section and a Problems section)