Engineering Economy, 9th edition

  • Gerald J. Thuesen
  • Wolter J. Fabrycky

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This book emphasizes the concepts and techniques of analysis that prove useful in evaluating the economic feasibility of engineering systems, projects, and services for decision purposes. It also familiarizes the engineer with operations and operational feasibility necessary to considerations of the design process. KEY TOPICS: Chapter topics cover economic and cost concepts; interest formula; calculations of economic equivalence; equivalence involving inflation; bases for comparison and decision-making among alternatives; evaluating production operations and replacement alternatives; accounting; income taxes in economic analysis; decisions under risk and uncertainty and involving multiple criteria; and estimating economic elements. For a basic understanding of mathematical modeling in complex operational systems, essential to a growing number of engineers today.

Table of contents

(NOTE: Most chapters conclude with Key Points and Questions and/or Problems.)


1. Engineering and Engineering Economy.

Engineering and Science. The Bi-Environmental Nature of Engineering. Physical and Economic Efficiency. The Engineering Process. Engineering for Economic Competitiveness. Engineering Economy and the Engineer.

2. Some Economic and Cost Concepts.

Concepts of Value and Utility. Consumer and Producer Goods. Economic Aspects of Exchange. Classifications of Cost. Life-Cycle Cost. Interest and Interest Rate. The Time Value of Money. The Earning Power of Money. The Purchasing Power of Money.


3. Interest Formulas.

Simple and Compound Interest. Describing Cash Flows over Time. Interest Formulas (Discrete Compounding, Discrete Payments). Interest-Formula Relationships. Compounding Frequency Considerations. Interest Formulas (Continuous Compounding, Discrete Payments). Summary of Interest Formulas.

4. Calculations of Economic Equivalence.

The Meaning of Equivalence. Equivalence Calculations Involving a Single Factor. Equivalence Calculations Involving Cash Flows. Principle of Equivalence. Equivalence Calculations with More Frequent Compounding. Equivalence Calculations Involving Bonds. Equivalence Calculations Involving Loans. Equivalence Calculations Involving Working Capital.

5. Equivalence Involving Inflation.

Measures of Inflation and Deflation. The Inflation Rate. Considering the Effects of Inflation. Analyzing Inflation in Investments.


6. Bases for Comparison of Alternatives.

Present Worth. Annual Equivalent. Future Worth. Internal Rate of Return. Payback Period. Capitalized Equivalent Amount. Capital Recovery with Return. Project Balance.

7. Decision Making among Alternatives.

Types of Investment Proposals. Forming Mutually Exclusive Alternatives. Elements of Decision Criteria. Present Worth on Incremental Investment. IRR on Incremental Investment. Comparisons Based on Total Investment. Comparing Alternatives with Unequal Lives.

8. Evaluating Production Operations.

Characteristics of Production Operations. Break-Even Analysis. Operation and Production Decisions. Economic Operation of Equipment. Models for Procurement Operations.

9. Evaluating Replacement Alternatives.

The General Nature of Replacement Analysis. Describing Replacement Alternatives. Replacement Analysis for Unequal Lives. The Economic Life of an Asset. Replacement Assumptions and Decisions. Retirement or Abandonment Decisions. Examples of Replacement Problems.

10 Evaluating Public Activities.

General Welfare Aim of Government. The Nature of Public Activities. Financing Public Activities. Public Activities and Engineering Economy. Benefit-Cost Analysis. Identifying Benefits, Disbenefits, and Costs. Cost-Effectiveness Analysis.


11. Accounting and Depreciation Accounting.

General Accounting. Cost Accounting. Depreciation. Accounting for the Depreciation of Capital Assets. Basic Depreciation Methods. Modified Accelerated Cost Recovery System (MACRS). Units-of-Production Depreciation. Depletion.

12. Income Taxes in Economic Analysis.

Relation of Income Taxes to Profit. Federal Income Tax for Corporations. Effective Income-Tax Rates. Interest and Income Taxes. Depreciation and Income Taxes. Gain or Loss on Disposition of Depreciable Assets. Tax Credits. Depletion and Income Taxes. Calculating After-Tax Cash Flows. Evaluation of Financing Methods Using After-Tax Cash Flows. Capital Gains in After-Tax Cash Flows. Inflation and Its Effects on After-Tax Flows. After-Tax Analysis of Replacements.


13. Estimating Economic Elements.

The Elements to Be Estimated. Cost Estimating Methods. Adjustment of Cost Data. Cost-Estimating Relationships. Estimating and Allocating Indirect Costs. Accounting Data in Estimating. Judgment in Estimating.

14. Estimates and Decision Making.

An Example Decision Based upon Estimates. Allowances for Uncertainty in Estimates. Considering a Rage of Estimates. Sensitivity Analysis.

15. Decisions Under Risk and Uncertainty.

Criteria for Decisions Under Risk. Expected-Value Decision Making. Expectation Variance Decision Making. Monte Carlo Analysis. Decision Trees in Decision Making. Decisions Under Uncertainty.

16. Decisions Involving Multiple Criteria.

Multiple Criteria Considerations. Direct Ranking Methods. Systematic Elimination Methods. Weighting Methods of Evaluation. Decision Evaluation Display. Decision Evaluation Display Examples. Summary: Making the Decision.


Interest Factors for Discrete Compounding. Effective Interest Rates Corresponding to Nominal Rate r.

Selected References.


Published by Pearson (May 30th 2000) - Copyright © 2001