Engineering economic analysis, 9th edition

Contents......Page 8
Preface......Page 18
1 Making Economic Decisions......Page 24
A SEA OF PROBLEMS......Page 25
THE ROLE OF ENGINEERING ECONOMIC ANALYSIS......Page 26
TH,E DECISION-MAKING PROCESS......Page 27
ENGINEERING DECISION MAKING FOR CURRENT COSTS......Page 36
SUMMARY......Page 39
PROBLEMS......Page 40
2 Engineering Costs and Cost Estimating......Page 48
ENGINEERING COSTS......Page 49
COST ESTIMATING......Page 59
ESTIMATING MODELS......Page 62
CASH FLOW DIAGRAMS......Page 71
SUMMARY......Page 73
PROBLEMS......Page 75
3 Interest and Equivalence......Page 82
COMPUTING CASH FLOWS......Page 83
TIME VALUE OF MONEY......Page 85
EQUIVALENCE......Page 89
SINGLE PAYMENT COMPOUND INTERESTFORMULAS......Page 94
SUMMARY......Page 102
PROBLEMS......Page 103
4 More Interest Formulas......Page 106
UNIFORM SERIESCOMPOUND INTERESTFORMULAS......Page 107
RELATIONSHIPS BETWEEN COMPOUND INTEREST FACTORS......Page 118
ARITHMETIC GRADIENT......Page 119
GEOMETRIC GRADIENT......Page 126
NOMINAL AND EFFECTIVE INTEREST......Page 130
CONTINUOUS COMPOUNDING......Page 136
SPREADSHEETS FOR ECONOMIC ANALYSIS......Page 143
SUMMARY......Page 147
PROBLEMS......Page 150
5 Present Worth Analysis......Page 164
ASSUMPTIONS IN SOLVING ECONOMIC ANALYSIS PROBLEMS......Page 165
ECONOMIC CRITERIA......Page 167
ApPLYING PRESENT WORTH TECHNIQUES......Page 168
SPREADSHEETSAND PRESENTWORTH......Page 183
SUMMARY......Page 185
PROBLEMS......Page 186
6 Annual Cash Flow Analysis......Page 198
ANNUAL CASH FLOW CALCULATIONS......Page 199
ANNUAL CASH FLOW ANALYSIS......Page 203
ANALYSIS PERIOD......Page 205
USING SPREADSHEETS TO ANALYZE LOANS......Page 211
SUMMARY......Page 214
PROBLEMS......Page 215
7 Rate of Return Analysis......Page 224
INTERNAL RATE OF RETURN......Page 225
CALCULATING RATE OF RETURN......Page 226
RATE OF RETURN ANALYSIS......Page 233
SPREADSHEETS AND RATE OF RETURN ANALYSIS......Page 241
SUMMARY......Page 242
PROBLEMS......Page 243
APPENDIX 7A Difficulties in Solvingfor an Interest Rate......Page 250
8 Incremental Analysis......Page 266
GRAPHICAL SOLUTIONS......Page 267
INCREMENTAL RATE OF RETURN ANALYSIS......Page 273
ELEMENTS IN INCREMENTAL RATE OF RETURN ANALYSIS......Page 278
PRESENT WORTH ANALYSIS WITH BENEFIT-COST GRAPHS......Page 281
CHOOSING AN ANALYSIS METHOD......Page 282
SPREADSHEETS AND INCREMENTAL ANALYSIS......Page 283
SUMMARY......Page 284
PROBLEMS......Page 285
9 Other AnalysisTechniques......Page 292
FUTURE WORTH ANALYSIS......Page 293
BENEFIT-COST RATIO ANALYSIS......Page 295
PAYBACK PERIOD......Page 301
SENSITIVITY AND BREAKEVEN ANALYSIS......Page 306
GRAPHING WITH SPREADSHEETS FOR SENSITIVITYAND BREAKEVEN ANALYSIS......Page 310
PROBLEMS......Page 314
10 Uncertainty in the Future Events......Page 324
ESTIMATES AND THEIR USE IN ECONOMIC ANALYSIS......Page 325
A RANGE OF ESTIMATES......Page 327
PROBABILITY......Page 329
JOINT PROBABILITY DISTRIBUTIONS......Page 332
EXPECTEDVALUE......Page 334
ECONOMIC DECISION TREES......Page 337
RISK......Page 343
RISK VERSUS RETURN......Page 345
SIMULATION......Page 347
PROBLEMS......Page 351
11 Depreciation......Page 358
BASIC ASPECTS OF DEPRECIATION......Page 359
HISTORICAL DEPRECIATION METHODS......Page 363
MODIFIED ACCELERATEDCOST RECOVERYSYSTEM (MACRS)......Page 368
DEPRECIAliON AND ASSET DISPOSAL......Page 377
UNIT-Of-PRODUCTION DEPRECIATION......Page 380
DEPLETION......Page 381
SPREADSHEETS AND DEPRECIATION......Page 383
SUMMARY......Page 385
PROBLEMS......Page 386
12 Income Taxes......Page 392
CALCULATION OF TAXABLEINCOME......Page 393
INCOME TAX RATES......Page 396
ECONOMIC ANALYSIS TAKING INCOME TAXES INTO ACCOUNT......Page 401
CAPITAL GAINS AND LOSSES FOR NON DEPRECIATEDASSETS......Page 405
AFTER-TAXCASH FLOWS AND SPREADSHEETS......Page 406
SUMMARY......Page 407
PROBLEMS......Page 408
13 Replacement Analysis......Page 420
THE REPLACEMENT PROBLEM......Page 421
WHAT Is THE BASICCOMPARISON?......Page 422
AFTER-TAX REPLACEMENT ANALYSIS......Page 441
SUMMARY......Page 450
PROBLEMS......Page 452
14 Inflation and Price Change......Page 460
MEANING AND EFFECTOF INFLATION......Page 461
ANALYSIS IN CONSTANT DOLLARS VERSUS THEN-CURRENT DOLLARS......Page 469
PRICECHANGE WITH INDEXES......Page 471
CASH FLOWS THAT INFLATEAT DIFFERENTRATES......Page 477
DIFFERENT INFLATION RATES PER PERIOD......Page 479
INFLATION EFFECT ON AFTER-TAX CALCULATIONS -......Page 481
USING SPREADSHEETSFOR INFLATION CALCULATIONS......Page 483
SUMMARY......Page 485
PROBLEMS......Page 486
15 Selection of a Minimum-Attractive Rate of Return......Page 494
SOURCES OF CAPITAL......Page 495
COST OF FUNDS......Page 496
INVESTMENT OPPORTUNITIES......Page 497
ADJUSTING MARR TO ACCOUNT FOR RISK AND UNCERTAINTY......Page 500
REPRESENTATIVEVALUESOF MARR USED IN INDUSTRY......Page 503
PROBLEMS......Page 506
16 Economic Analysis in the Public Sector......Page 510
INVESTMENT OBJECTIVE......Page 511
VIEWPOINT FOR ANALYSIS......Page 513
ELECTINGAN INTERESTRATE......Page 514
THE BENEFIT-COST RATIO......Page 517
INCREMENTAL BENEFIT-COST ANALYSIS......Page 519
OTHER EFFECTSOF PUBLIC PROJECTS......Page 526
SUMMARY......Page 530
PROBLEMS......Page 531
17 Rationing Capital AmongCompeting Projects......Page 538
CAPITAL EXPENDITURE PROJECT PROPOSALS......Page 539
TIONING CAPITAL BY RATE OF RETURN......Page 542
RATIONING CAPITAL BY PRESENTWORTH METHODS......Page 545
RANKING PROJECT PROPOSALS......Page 551
SUMMARY......Page 553
PROBLEMS......Page 554
18 Accounting and Engineering Economy......Page 560
THE ROLE OF ACCOUNTING......Page 561
BALANCESHEET......Page 562
THE INCOME STATEMENT......Page 565
ADDITTIONAL COST ACCOUNTING......Page 568
PROBLEMS......Page 572
Appendix A Introduction to Spreadsheets......Page 575
Appendix B Compound InterestTables......Page 580
References......Page 612
Index......Page 614
Economic Criteria......Page 620