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Part of: Synthesis digital library of engineering and computer science.

Series from website.

1. Introduction -- 1.1 Engineering economics -- 1.1.1 Basic engineering economics -- 1.1.2 Risk analysis -- 1.2 Decision analysis -- 1.3 Fundamentals of engineering exam --

2. Interest and the time value of money -- 2.1 Time value of money -- 2.2 Sources of capital -- 2.3 Interest concepts -- 2.3.1 Simple interest -- 2.3.2 Compound interest -- 2.3.3 Nominal, effective, and continuous interest rates -- 2.4 Cash flow diagrams -- 2.5 Interest formulas for discrete compounding -- 2.5.1 Single payments -- 2.5.2 Uniform series (annuities) -- 2.5.3 Uniform gradient -- 2.5.4 The use of financial functions in Excel -- 2.5.5 Example problems -- 2.6 Interest formulas for continuous compounding -- 2.6.1 Continuous compounding for discrete payments -- 2.6.2 Continuous compounding for continuous payments -- 2.7 Problems --

3. Project evaluation methods -- 3.1 Introduction -- 3.2 Alternate uses of capital -- 3.3 Minimum acceptable rate of return (MARR) -- 3.4 Equivalence methods -- 3.5 Net present value -- 3.5.1 Analysis of a single investment opportunity -- 3.5.2 Do nothing project -- 3.5.3 Analysis of multiple investment opportunities -- 3.6 Rate of return methods -- 3.6.1 Internal rate of return (IRR) -- 3.6.2 Spreadsheet formula for IRR -- 3.6.3 External rate of return (ERR) -- 3.6.4 Spreadsheet formula for ERR -- 3.7 The reinvestment question in rate of return calculations -- 3.7.1 Perception #1 -- 3.7.2 Perception #2 -- 3.7.3 Final comments on ERR and IRR relationships -- 3.8 Acceleration projects -- 3.9 Payout -- 3.10 Problems --

4. Service producing investments -- 4.1 Introduction -- 4.2 Equal life alternatives -- 4.2.1 Equivalence techniques -- 4.2.2 Rate of return methods -- 4.3 Unequal life alternatives -- 4.3.1 Least common multiple method -- 4.3.2 Common study period -- 4.4 Problems --

5. Income producing investments -- 5.1 Introduction -- 5.2 Investment in a single project -- 5.3 Mutually exclusive alternatives -- 5.3.1 Equivalence techniques -- 5.3.2 Rate of return techniques -- 5.3.3 Using Excel -- 5.4 Unequal life alternatives -- 5.5 Independent and contingent investments -- 5.5.1 Independent investments -- 5.5.2 Contingent investments -- 5.5.3 Limited investment capital -- 5.6 Ranking alternatives -- 5.7 Problems --

6. Determination of project cash flow -- 6.1 Introduction -- 6.2 Escalation and inflation -- 6.3 Depreciation -- 6.3.1 Straight-line depreciation (SL) -- 6.3.2 Declining-balance depreciation -- 6.3.3 Sum-of-the-years-digits (SYD) depreciation -- 6.3.4 Modified accelerated cost recovery system (MACRS) -- 6.4 Cash flow computation -- 6.4.1 Capital investment -- 6.4.2 Gross revenue -- 6.4.3 Operating expenses -- 6.4.4 Before-tax profit computation -- 6.4.5 Before-tax cash flow computation -- 6.4.6 Depreciation -- 6.4.7 Taxable income -- 6.4.8 State and federal income tax -- 6.4.9 Net profit -- 6.4.10 Cash flow -- 6.5 Problems --

7. Financial leverage -- 7.1 Introduction -- 7.2 Financial leverage and associated risk -- 7.3 Adjustment to cash flow equations -- 7.3.1 Leverage and mutually exclusive projects -- 7.3.2 Excel spreadsheet -- 7.4 Problems --

8. Basic statistics and probability -- 8.1 Introduction -- 8.2 Statistics -- 8.2.1 Measures of central tendency -- 8.2.2 Measures of dispersion -- 8.2.3 Frequency distributions -- 8.2.4 Relative frequency distribution -- 8.3 Probability -- 8.3.1 Classical definition -- 8.3.2 Relative frequency definition -- 8.3.3 Subjective definition -- 8.3.4 Probability distributions -- 8.4 Problems --

9. Sensitivity analysis -- 9.1 Introduction -- 9.1.1 Range approach -- 9.1.2 Monte Carlo simulation -- 9.2 Problems --

A. Compound interest factors -- Authors' biographies.

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The authors cover two general topics: basic engineering economics and risk analysis in this text. Within the topic of engineering economics are discussions on the time value of money and interest relationships. These interest relationships are used to define certain project criteria that are used by engineers and project managers to select the best economic choice among several alternatives. Projects examined will include both income- and service-producing investments. The effects of escalation, inflation, and taxes on the economic analysis of alternatives are discussed. Risk analysis incorporates the concepts of probability and statistics in the evaluation of alternatives. This allows management to determine the probability of success or failure of the project. Two types of sensitivity analyses are presented. The first is referred to as the range approach while the second uses probabilistic concepts to determine a measure of the risk involved. The authors have designed the text to assist individuals to prepare to successfully complete the economics portions of the Fundamentals of Engineering Exam.

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