Engineering Economy 16th Edition by William Sullivan, Elin Wicks, C Koelling ISBN 0133750213 9780133750218

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ISBN 10: 0133750213
ISBN 13: 9780133750218
Author: William Sullivan, Elin Wicks, C Koelling

Engineering Economy is intended to serve as a text for classroom instruction in undergraduate, introductory courses in Engineering Economics. It also serves as a basic reference for use by practicing engineers in all specialty areas (e.g., chemical, civil, computer, electrical, industrial, and mechanical engineering). The book is also useful to persons engaged in the management of technical activities.

Used by engineering students worldwide, this best-selling text provides a sound understanding of the principles, basic concepts, and methodology of engineering economy. Built upon the rich and time-tested teaching materials of earlier editions, it is extensively revised and updated to reflect current trends and issues, with an emphasis on the economics of engineering design throughout. It provides one of the most complete and up-to-date studies of this vitally important field.

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This program will provide a better teaching and learning experience―for you and your students. It will help:

• Personalize Learning: MyEngineeringLab provides students with a personalized interactive learning environment, where they can learn at their own pace and measure their progress.
• Provide a Solid Foundation in the Principles, Concepts, and Methodology of Engineering Economy: Students will learn to understand and apply economic principles to engineering.
• Prepare Students for Professional Practice: Students will develop proficiency with the process for making rational decisions that they are likely to encounter in professional practice.
• Support Learning: The TestGen testbank allows instructors to regenerate algorithmically-generated variables within each problem to offer students a virtually unlimited number of paper or online assessments.

Engineering Economy 16th Table of contents:

Chapter 1 Introduction to Engineering Economy

1.1 Introduction

1.2 The Principles of Engineering Economy

1.3 Engineering Economy and the Design Process

1.3.1 Problem Definition

1.3.2 Development of Alternatives*

1.3.2.1 Searching for Superior Alternatives

1.3.2.2 Developing Investment Alternatives

1.3.3 Development of Prospective Outcomes

1.3.4 Selection of a Decision Criterion

1.3.5 Analysis and Comparison of Alternatives

1.3.6 Selection of the Preferred Alternative

1.3.7 Performance Monitoring and Postevaluation of Results

1.4 Using Spreadsheets in Engineering Economic Analysis

1.5 Try Your Skills

1.6 Summary

Problems

Chapter 2 Cost Concepts and Design Economics

2.1 Cost Terminology

2.1.1 Fixed, Variable, and Incremental Costs

2.1.2 Direct, Indirect, and Standard Costs

2.1.3 Cash Cost versus Book Cost

2.1.4 Sunk Cost

2.1.5 Opportunity Cost

2.1.6 Life-Cycle Cost

2.2 The General Economic Environment

2.2.1 Consumer and Producer Goods and Services

2.2.2 Measures of Economic Worth

2.2.3 Necessities, Luxuries, and Price Demand

2.2.4 Competition

2.2.5 The Total Revenue Function

2.2.6 Cost, Volume, and Breakeven Point Relationships

2.3 Cost-Driven Design Optimization

2.4 Present Economy Studies

2.4.1 Total Cost in Material and Process Selection

2.4.2 Making versus Purchasing (Outsourcing) Studies*

2.4.3 Trade-Offs in Energy Efficiency Studies

2.6 In-Class Exercise

2.7 Try Your Skills

2.8 Summary

Problems

Spreadsheet Exercises

Case Study Exercises

FE Practice Problems

Chapter 3 Cost-Estimation Techniques

3.1 Introduction

3.2 An Integrated Approach

3.2.1 The Work Breakdown Structure (WBS)

3.2.2 The Cost and Revenue Structure

3.2.3 Estimating Techniques (Models)

3.2.3.1 Sources of Estimating Data

3.2.3.2 How Estimates are Accomplished

3.3 Selected Estimating Techniques (Models)

3.3.1 Indexes

3.3.2 Unit Technique

3.3.3 Factor Technique

3.4 Parametric Cost Estimating

3.4.1 Power-Sizing Technique

3.4.2 Learning and Improvement

3.4.3 Developing a Cost Estimating Relationship (CER)

3.4.3.1 Problem Definition

3.4.3.2 Data Collection and Normalization

3.4.3.3 CER Equation Development

3.4.3.4 Model Validation and Documentation

3.6 Electronic Spreadsheet Modeling: Learning Curve

3.7 In-Class Exercise

3.8 Try Your Skills

3.9 Summary

Problems

Spreadsheet Exercises

Case Study Exercises

FE Practice Problems

Chapter 4 The Time Value of Money

4.1 Introduction

4.1.1 Why Consider Return to Capital?

4.1.2 The Origins of Interest

4.2 Simple Interest

4.3 Compound Interest

4.4 The Concept of Equivalence

4.5 Notation and Cash-Flow Diagrams and Tables

4.6 Relating Present and Future Equivalent Values of Single Cash Flows

4.6.1 Finding F when Given P

4.6.2 Finding P when Given F

4.6.3 Finding the Interest Rate Given P, F, and N

4.6.4 Finding N when Given P, F, and i

4.7 Relating a Uniform Series (Annuity) to Its Present and Future Equivalent Values

4.7.1 Finding F when Given A

4.7.2 Finding P when Given A

4.7.3 Finding A when Given F

4.7.4 Finding A when Given P

4.7.5 Finding the Number of Cash Flows in an Annuity Given A, P, and i

4.7.6 Finding the Interest Rate, i, Given A, F, and N

4.8 Summary of Interest Formulas and Relationships for Discrete Compounding

4.9 Deferred Annuities (Uniform Series)

4.10 Equivalence Calculations Involving Multiple Interest Formulas

Solution

Solution

Solution

4.11 Uniform (Arithmetic) Gradient of Cash Flows

4.11.1 Finding P when Given G

4.11.2 Finding A when Given G

4.11.3 Finding F when Given G

4.11.4 Computations Using G

4.12 Geometric Sequences of Cash Flows

4.13 Interest Rates that Vary with Time

4.14 Nominal and Effective Interest Rates

4.15 Compounding More Often than Once per Year

4.15.1 Single Amounts

4.15.2 Uniform Series and Gradient Series

4.16 Interest Formulas for Continuous Compounding and Discrete Cash Flows

4.18 In-Class Exercise

4.19 Try Your Skills

4.20 Summary

Problems

Spreadsheet Exercises

Case Study Exercises

FE Practice Problems

Chapter 5 Evaluating a Single Project

5.1 Introduction

5.2 Determining the Minimum Attractive Rate of Return (MARR)

5.3 The Present Worth Method

5.3.1 Assumptions of the PW Method

5.3.2 Bond Value

5.3.3 The Capitalized-Worth Method

5.4 The Future Worth Method

5.5 The Annual Worth Method

5.6 The Internal Rate of Return Method

5.6.1 Installment Financing

5.6.2 Difficulties Associated with the IRR Method

5.7 The External Rate of Return Method†

5.8 The Payback (Payout) Period Method

5.10 Electronic Spreadsheet Modeling: Payback Period Method

5.11 In-Class Exercise

5.12 Try Your Skills

5.13 Summary

Problems

Spreadsheet Exercises

Case Study Exercises

FE Practice Problems

Appendix 5-A The Multiple Rate of Return Problem with the IRR Method

Appendix 5-A Problems

Chapter 6 Comparison and Selection among Alternatives

6.1 Introduction

6.2 Basic Concepts for Comparing Alternatives

6.2.1 Investment and Cost Alternatives

6.2.2 Ensuring a Comparable Basis

6.3 The Study (Analysis) Period

6.4 Useful Lives Are Equal to the Study Period

6.4.1 Equivalent-Worth Methods

6.4.2 Rate-of-Return Methods

6.4.2.1 The Inconsistent Ranking Problem

6.4.2.2 The Incremental Investment Analysis Procedure

6.5 Useful Lives Are Unequal among the Alternatives

6.5.1 Equivalent-Worth Methods

6.5.2 Rate-of-Return Analysis

6.5.3 The Imputed Market Value Technique

6.6 Personal Finances

6.8 Postevaluation of Results

6.9 Project Postevaluation Spreadsheet Approach

6.10 In-Class Exercise

6.11 Try Your Skills

6.12 Summary

Problems

Spreadsheet Exercises

Case Study Exercises

FE Practice Problems

Chapter 7 Depreciation and Income Taxes

7.1 Introduction

7.2 Depreciation Concepts and Terminology

7.2.1 Depreciation Methods and Related Time Periods

7.2.2 Additional Definitions

7.3 The Classical (Historical) Depreciation Methods

7.3.1 Straight-Line (SL) Method

7.3.2 Declining-Balance (DB) Method

7.3.3 DB with Switchover to SL

7.3.4 Units-of-Production Method

7.4 The Modified Accelerated Cost Recovery System

7.4.1 Property Class and Recovery Period

7.4.2 Depreciation Methods, Time Convention, and Recovery Rates

7.4.3 MACRS Spreadsheet

7.5 A Comprehensive Depreciation Example

7.6 Introduction to Income Taxes

7.6.1 Distinctions between Different Types of Taxes

7.6.2 The Before-Tax and After-Tax Minimum Attractive Rates of Return

7.6.3 The Interest Rate to Use in After-Tax Studies

7.6.4 Taxable Income of Corporations (Business Firms)

7.7 The Effective Corporate Income Tax Rate

Personal Income Tax

7.8 Gain (Loss) on the Disposal of an Asset

7.9 General Procedure for Making After-Tax Economic Analyses

7.10 Illustration of Computations of ATCFs

7.11 Economic Value Added

7.12 In-Class Exercise

7.13 Try Your Skills

7.14 Summary

Problems

Spreadsheet Exercises

FE Practice Problems

Chapter 8 Price Changes and Exchange Rates

8.1 Introduction

8.2 Terminology and Basic Concepts

8.2.1 The Relationship between Actual Dollars and Real Dollars

8.2.2 The Correct Interest Rate to Use in Engineering Economy Studies

8.2.3 The Relationship among im, ir, and f

8.3 Fixed and Responsive Annuities

8.4 Differential Price Changes

8.4.1 The Relationship among ej, e’j, and f

8.5 Spreadsheet Application

8.6 Foreign Exchange Rates and Purchasing Power Concepts

8.8 In-Class Exercise

8.9 Try Your Skills

8.10 Summary

Problems

Spreadsheet Exercises

Case Study Exercises

FE Practice Problems

Chapter 9 Replacement Analysis

9.1 Introduction

9.2 Reasons for Replacement Analysis

9.3 Factors that Must Be Considered in Replacement Studies

9.3.1 Past Estimation Errors

9.3.2 The Sunk-Cost Trap

9.3.3 Investment Value of Existing Assets and the Outsider Viewpoint

9.3.4 Economic Life of the Challenger

9.3.5 Economic Life of the Defender

9.3.6 The Importance of Income Tax Consequences

9.4 Typical Replacement Problems

9.5 Determining the Economic Life of a New Asset (Challenger)

9.6 Determining the Economic Life of a Defender

9.7 Comparisons in Which the Defender’s Useful Life Differs from that of the Challenger

9.8 Retirement without Replacement (Abandonment)

9.9 After-Tax Replacement Studies

9.9.1 After-Tax Economic Life

9.9.2 After-Tax Investment Value of the Defender

9.9.3 Illustrative After-Tax Replacement Analyses

9.11 In-Class Exercise

9.12 Try Your Skills

9.13 Summary

Problems

Spreadsheet Exercises

Case Study Exercises

FE Practice Problems

Chapter 10 Evaluating Projects with the Benefit–Cost Ratio Method

10.1 Introduction

10.2 Perspective and Terminology for Analyzing Public Projects

10.3 Self-Liquidating Projects

10.4 Multiple-Purpose Projects

10.5 Difficulties in Evaluating Public-Sector Projects

10.6 What Interest Rate Should Be Used for Public Projects?

10.7 The Benefit–Cost Ratio Method

10.7.1 Disbenefits in the B–C Ratio

10.7.2 Added Benefits versus Reduced Costs in B–C Analyses

10.8 Evaluating Independent Projects by B–C Ratios

10.9 Comparison of Mutually Exclusive Projects by B–C Ratios

10.11 Try Your Skills

10.12 Summary

Problem

FE Practice Problems

Chapter 11 Breakeven and Sensitivity Analysis

11.1 Introduction

11.2 Breakeven Analysis

11.3 Sensitivity Analysis

11.4 Multiple Factor Sensitivity Analysis

11.5 Try Your Skills

11.6 Summary

Problem

Spreadsheet Exercises

FE Practice Problems

Chapter 12 Probabilistic Risk Analysis

12.1 Introduction

12.2 Sources of Uncertainty

12.3 The Distribution of Random Variables

12.3.1 Discrete Random Variables

12.3.2 Continuous Random Variables

12.3.3 Mathematical Expectation and Selected Statistical Moments

12.3.4 Multiplication of a Random Variable by a Constant

12.3.5 Multiplication of Two Independent Random Variables

12.4 Evaluation of Projects with Discrete Random Variables

12.4.1 Probability Trees

12.4.2 An Application Perspective

12.5 Evaluation of Projects with Continuous Random Variables

12.6 Evaluation of Risk and Uncertainty by Monte Carlo Simulation

12.7 Performing Monte Carlo Simulation with a Computer

12.8 Decision Trees

12.8.1 Deterministic Example

12.8.1.1 Deterministic Example Considering Timing

12.8.2 General Principles of Diagramming

12.8.3 Decision Trees with Random Outcomes

12.9 Real Options Analysis

12.10 Summary

Problems

Spreadsheet Exercises

Chapter 13 The Capital Budgeting Process*

13.1 Introduction

13.1.1 The Capital Financing and Allocation Functions

13.1.2 Sources of Capital Funds

13.2 Debt Capital

13.3 Equity Capital

13.3.1 The Capital Asset Pricing Model (CAPM)

13.3.2 Estimating the Cost of Equity

13.4 The Weighted Average Cost of Capital (WACC)

13.4.1 The Separation Principle

13.4.2 WACC and Risk

13.4.3 Relation of WACC to the MARR

13.4.4 Opportunity Costs and Risk Categories in Determining MARRs

13.5 Project Selection

13.5.1 Classifying Investment Proposals

13.5.2 Degrees of Dependency Among Projects

13.5.3 Organization for Capital Planning and Budgeting

13.5.4 Communication

13.6 Postmortem Review

13.7 Budgeting of Capital Investments and Management Perspective

13.8 Leasing Decisions

13.9 Capital Allocation

13.9.1 Allocating Capital Among Independent Projects

13.9.2 Linear Programming Formulations of Capital Allocation Problems

13.10 Summary

Problems

Chapter 14 Decision Making Considering Multiattributes

14.1 Introduction

14.2 Examples of Multiattribute Decisions

14.3 Choice of Attributes

14.4 Selection of a Measurement Scale

14.5 Dimensionality of the Problem

14.6 Noncompensatory Models

14.6.1 Dominance

14.6.2 Satisficing

14.6.3 Disjunctive Resolution

14.6.4 Lexicography

14.7 Compensatory Models

14.7.1 Nondimensional Scaling

14.7.2 The Additive Weighting Technique

14.8 Summary

Problems

Spreadsheet Exercises

Appendix A Accounting Fundamentals

A.1 The Fundamental Accounting Equation

A.2 Basic Accounting Transactions

A.3 Example – Peavy Design2

A.4 Cost Accounting

A.5 Cost Accounting Example

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