Fundamentals of engineering economics / Chan S. Park. 6

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Includes bibliographical references and index.

Machine generated contents note: pt. 1 UNDERSTANDING MONEY AND ITS MANAGEMENT ch. 1 Engineering Economic Decisions 1.1.The Rational Decision-Making Process 1.1.1.How Do We Make Typical Personal Decisions? 1.1.2.How Do We Approach an Engineering Design Problem? 1.1.3.What Makes Economic Decisions Different from Other Design Decisions? 1.2.The Engineer's Role in Business 1.2.1.Making Capital-Expenditure Decisions 1.2.2.Large-Scale Engineering Economic Decisions 1.2.3.Impact of Engineering Projects on Financial Statements 1.3.Types of Strategic Engineering Economic Decisions 1.3.1.New Products or Product Expansion 1.3.2.Equipment and Process Selection 1.3.3.Cost Reduction 1.3.4.Equipment Replacement 1.3.5.Service or Quality Improvement 1.4.Fundamental Principles in Engineering Economics Summary Self-Test Questions Problems ch. 2 Time Value of Money 2.1.Interest: The Cost of Money 2.1.1.The Time Value of Money Contents note continued: 2.1.2.Elements of Transactions Involving Interest 2.1.3.Methods of Calculating Interest 2.2.Economic Equivalence 2.2.1.Definition and Simple Calculations 2.2.2.Equivalence Calculations Require a Common Time Basis for Comparison 2.3.Interest Formulas for Single Cash Flows 2.3.1.Compound-Amount Factor 2.3.2.Present-Worth Factor 2.3.3.Solving for Time and Interest Rates 2.4.Uneven-Payment Series 2.5.Equal-Payment Series 2.5.1.Compound-Amount Factor: Find F, Given A, i, and N 2.5.2.Sinking-Fund Factor: Find A, Given F, i, and N 2.5.3.Capital-Recovery Factor (Annuity Factor): Find A, Given P, i, and N 2.5.4.Present-Worth Factor: Find P, Given A, i, and N 2.5.5.Present Value of Perpetuities 2.6.Dealing with Gradient Series 2.6.1.Handling Linear Gradient Series 2.6.2.Handling Geometric Gradient Series 2.7.More on Equivalence Calculations Contents note continued: ch. 3 Understanding Money Management 3.1.Market Interest Rates 3.1.1.Nominal Interest Rates 3.1.2.Annual Effective Yields 3.2.Calculating Effective Interest Rates Based on Payment Periods 3.2.1.Discrete Compounding 3.2.2.Continuous Compounding 3.3.Equivalence Calculations with Effective Interest Rates 3.3.1.Compounding Period Equal to Payment Period 3.3.2.Compounding Occurs at a Different Rate than That at Which Payments are Made 3.4.Debt Management 3.4.1.Borrowing with Credit Cards 3.4.2.Commercial Loans -Calculating Principal and Interest Payments 3.4.3.Comparing Different Financing Options ch. 4 Equivalence Calculations under Inflation 4.1.Measure of Inflation 4.1.1.Consumer Price Index 4.1.2.Producer Price Index 4.1.3.Average Inflation Rate 4.1.4.General Inflation Rate (f) versus Specific Inflation (fj) 4.2.Actual versus Constant Dollars Contents note continued: 4.2.1.Conversion from Constant to Actual Dollars 4.2.2.Conversion from Actual to Constant Dollars 4.3.Equivalence Calculations under Inflation 4.3.1.Market and Inflation-Free Interest Rates 4.3.2.Constant-Dollar Analysis 4.3.3.Actual-Dollar Analysis 4.3.4.Mixed-Dollar Analysis pt. 2 EVALUATING BUSINESS AND ENGINEERING ASSETS ch. 5 Present-Worth Analysis 5.1.Loan versus Project Cash Flows 5.2.Initial Project Screening Methods 5.2.1.Benefits and Flaws of Payback Screening 5.2.2.Discounted-Payback Period 5.3.Present-Worth Analysis 5.3.1.Net-Present-Worth Criterion 5.3.2.Guidelines for Selecting a MARR 5.3.3.Meaning of Net Present Worth 5.3.4.Net Future Worth and Project Balance Diagram 5.3.5.Capitalized-Equivalent Method 5.4.Methods to Compare Mutually Exclusive Alternatives 5.4.1.Doing Nothing Is a Decision Option Contents note continued: 5.4.2.Service Projects versus Revenue Projects 5.4.3.Analysis Period Equals Project Lives 5.4.4.Analysis Period Differs from Project Lives ch. 6 Annual-Equivalence Analysis 6.1.Annual-Equivalent Worth Criterion 6.1.1.Benefits of AE Analysis 6.1.2.Capital (Ownership) Costs versus Operating Costs 6.2.Applying Annual-Worth Analysis 6.2.1.Unit-Profit or Unit-Cost Calculation 6.2.2.Make-or-Buy Decision 6.3.Comparing Mutually Exclusive Projects 6.3.1.Analysis Period Equals Project Lives 6.3.2.Analysis Period Differs from Project Lives ch. 7 Rate-of-Return Analysis 7.1.Rate of Return 7.1.1.Return on Investment 7.1.2.Return on Invested Capital 7.2.Methods for Finding Rate of Return 7.2.1.Simple versus Nonsimple Investments 7.2.2.Computational Methods 7.3.Internal-Rate-of-Return Criterion Contents note continued: 7.3.1.Relationship to the PW Analysis 7.3.2.Decision Rule for Simple Investments 7.3.3.Decision Rule for Nonsimple Investments 7.4.Incremental Analysis for Comparing Mutually Exclusive Alternatives 7.4.1.Flaws in Project Ranking by IRR 7.4.2.Incremental-Investment Analysis 7.4.3.Handling Unequal Service Lives ch. 7A Resolution of Multiple Rates of Return 7A-1.Net-Investment Test 7A-2.The Need for an External Interest Rate 7A-3.Calculation of Return on Invested Capital for Mixed Investments ch. 8 Benefit-Cost Analysis 8.1.Evaluation of Public Projects 8.1.1.Valuation of Benefits and Costs 8.1.2.Users' Benefits 8.1.3.Sponsor's Costs 8.1.4.Social Discount Rate 8.2.Benefit-Cost Analysis 8.2.1.Definition of Benefit-Cost Ratio 8.2.2.Incremental B/​C-Ratio Analysis 8.3.Profitability Index 8.3.1.Definition of Profitability Index Contents note continued: 8.3.2.Incremental PI Ratio for Mutually Exclusive Alternatives 8.4.Highway Benefit-Cost Analysis 8.4.1.Define the Base Case and the Proposed Alternatives 8.4.2.Highway User Benefits 8.4.3.Sponsors' Costs 8.4.4.Illustrating Case Example pt. 3 DEVELOPMENT OF PROJECT CASH FLOWS ch. 9 Accounting for Depreciation and Income Taxes 9.1.Accounting Depreciation 9.1.1.Depreciable Property 9.1.2.Cost Basis 9.1.3.Useful Life and Salvage Value 9.1.4.Depreciation Methods: Book and Tax Depreciation 9.2.Book Depreciation Methods 9.2.1.Straight-Line Method 9.2.2.Declining-Balance Method 9.2.3.Units-of-Production Method 9.3.Tax Depreciation Methods 9.3.1.MACRS Recovery Periods 9.3.2.MACRS Depreciation: Personal Property 9.3.3.MACRS Depreciation: Real Property 9.4.Corporate Taxes 9.4.1.How to Determine Accounting Profit Contents note continued: 9.4.2.U.S. Corporate Income Tax Rates 9.4.3.Gain Taxes on Asset Disposals ch. 10 Project Cash-Flow Analysis 10.1.Understanding Project Cost Elements 10.1.1.Classifying Costs for Manufacturing Environments 10.1.2.Classifying Costs for Financial Statements 10.1.3.Classifying Costs for Predicting Cost Behavior 10.2.Why Do We Need to Use Cash Flows in Economic Analysis? 10.3.Income-Tax Rate to Be Used in Project Evaluation 10.4.Incremental Cash Flows from Undertaking a Project 10.4.1.Operating Activities 10.4.2.Investing Activities 10.4.3.Financing Activities 10.5.Developing Project Cash Flow Statements 10.5.1.When Projects Require Only Operating and Investing Activities 10.5.2.When Projects Are Financed with Borrowed Funds 10.6.Effects of Inflation on Project Cash Flows 10.6.1.Depreciation Allowance under Inflation 10.6.2.Handling Multiple Inflation Rates Contents note continued: Summary ch. 11 Handling Project Uncertainty 11.1.Origins of Project Risk 11.2.Methods of Describing Project Risk 11.2.1.Sensitivity Analysis 11.2.2.Sensitivity Analysis for Mutually Exclusive Alternatives 11.2.3.Break-Even Analysis 11.2.4.Scenario Analysis 11.3.Probabilistic Cash Flow Analysis 11.3.1.Including Risk in Investment Evaluation 11.3.2.Aggregating Risk over Time 11.3.3.Estimating Risky Cash Flows 11.4.Considering the Project Risk by Discount Rate 11.4.1.Determining the Company Cost of Capital 11.4.2.Project Cost of Capital: Risk-Adjusted Discount Rate Approach pt. 4 SPECIAL TOPICS IN ENGINEERING ECONOMICS ch. 12 Replacement Decisions 12.1.Replacement-Analysis Fundamentals 12.1.1.Basic Concepts and Terminology 12.1.2.Approaches for Comparing Defender and Challenger 12.2.Economic Service Life Contents note continued: 12.3.Replacement Analysis When the Required Service Period Is Long 12.3.1.Required Assumptions and Decision Frameworks 12.3.2.Handling Unequal Service Life Problems in Replacement Analysis 12.3.3.Replacement Strategies under the Infinite Planning Horizon 12.4.Replacement Analysis with Tax Considerations ch.

13 Understanding Financial Statements 13.1.Accounting: The Basis of Decision Making 13.2.Financial Status for Businesses 13.2.1.The Balance Sheet 13.2.2.The Income Statement 13.2.3.The Cash-Flow Statement 13.3.Using Ratios to Make Business Decisions 13.3.1.Debt Management Analysis 13.3.2.Liquidity Analysis 13.3.3.Asset Management Analysis 13.3.4.Profitability Analysis 13.3.5.Market-Value Analysis 13.3.6.Limitations of Financial Ratios in Business Decisions 13.3.7.Where We Get the Most Up-to-Date Financial Information Contents note continued: 13.4.Principle of Investing in Financial Assets 13.4.1.Trade-Off between Risk and Reward 13.4.2.Broader Diversification Reduces Risk 13.4.3.Broader Diversification Increases Expected Return Problems.

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