Essentials of Engineering Economic Analysis

Compound Interest Equations (inside front cover); Economic Criteria (inside back cover); PREFACE; 1. MAKING ECONOMIC DECISIONS; 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 the Problem, Define the Goals, Assemble Relevant Data, Identify Feasible Alternatives, Select the Criterion, Construct a Model, Predict the Outcomes, Choose the Best Alternative, Audit the Results; ENGINEERING DECISION MAKING; 2. ENGINEERING COSTS AND COST ESTIMATING; 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 a Cash Flow Diagram with a Spreadsheet; 3. INTEREST AND EQUIVALENCE; COMPUTING CASH FLOWS; TIME VALUE OF MONEY; SIMPLE INTEREST; Repaying a Debt; EQUIVALENCE; Difference in Repayment Plans, Equivalence is Dependent on Interest Rate, Application of Equivalence Calculations; SINGLE PAYMENT COMPOUND INTEREST FORMULAS; 4. MORE 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 Graphing Using Spreadsheets; 5. PRESENT WORTH ANALYSIS; ECONOMIC CRITERIA; APPLYING PRESENT WORTH TECHNIQUES; Useful Lives Equal the Analysis Period, Net Present Worth, Useful Lives Different from the Analysis 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; 6. ANNUAL CASH FLOW ANALYSIS; 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; 7. RATE OF RETURN ANALYSIS; INTERNAL RATE OF RETURN; CALCULATING RATE OF RETURN; Plot of NPW vs. Interest Rate i; RATE OF RETURN ANALYSIS; Analysis Period, Spreadsheets and Rate of Return Analysis; 7A. DIFFICULTIES SOLVING FOR AN INTEREST RATE; 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 Computation of Rate of Return; 8. INCREMENTAL ANALYSIS; GRAPHICAL SOLUTIONS; 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; 9. OTHER ANALYSIS TECHNIQUES; FUTURE WORTH ANALYSIS; BENEFIT-COST RATIO ANALYSIS; Continuous Alternatives; PAYBACK PERIOD; SENSITIVITY AND BREAKEVEN ANALYSIS; Graphing with Spreadsheets for Sensitivity and Breakeven Analysis; 10. DEPRECIATION; BASIC ASPECTS OF DEPRECIATION; Deterioration and Obsolescence, 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; 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; DEPLETION AND ASSET DISPOSAL; UNIT OF PRODUCTION DEPRECIATION; DEPLETION; Cost Depletion, Percentage Depletion; SPREADSHEETS AND DEPRECIATION; 11. INCOME TAXES; 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-DEPRECIABLE ASSETS; Investment Tax Credit; ESTIMATING THE AFTER-TAX RATE OF RETURN; AFTER-TAX CASH FLOWS AND SPREADSHEETS; 12. REPLACEMENT ANALYSIS; 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 #1, Minimum Cost Life of the Defender, Replacement Analysis Technique #2, No Defender Marginal Cost Data Available, Replacement Analysis Technique #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; Values of Interest Factors When N Equals Infinity; (Each chapter ends with a summary and problems.)