This book provides a straightforward approach to explaining engineering economics that is appropriate for members of all of the major engineering disciplines. It includes real world engineering economic analysis examples, and provides the basic knowledge required for engineers to be able to perform engineering economic analyses for different potential alternative equipment, products, services, and projects in both the public and private sectors. It focuses on mastering the basic engineering economics formulas and their use on different types of engineering and construction projects, and includes numerous example problems and real world case studies.
Introduction
Introduction to Engineering Economics
Money as a Means of Commerce
Improving the Economics of Projects
Managing Costs and Profits
Summary
Key Terms
Problems
Time Value of Money
Definition of Interest
Definition of Engineering Economic Terms
Cash Flow Diagrams
Summary
Key Terms
Problems
Present Worth, Future Worth, and Unknown Interest Rates
Definition of Equivalence
Single Payment Compound Amount Factor¾ Future Worth
Present Worth Compound Amount Factor¾ Present Worth
Compounding Periods Different than One Year
Solving for Unknown Interest Rates
Using Factor Tables to Solve for Present and Future Worth
Summary
Key Terms
Problems
Annuities
Uniform Series Compound Amount Factor¾ Future Worth of Annuities
Uniform Series Sinking Fund Factor¾ Annuity of a Future Value
Uniform Series Present Worth Recovery Factor¾ Present Worth of Annuities
Uniform Series Capital Recovery Factor¾ Annuity of a Present Worth
Present Worth of an Infinite Uniform Series¾ Unlimited Payment Series
Using Factor Tables to Solve for Annuities
Summary
Key Terms
Problems
Arithmetic and Geometric Gradients
Definition of Arithmetic Gradients
Future Worth of Arithmetic Gradient Amounts
Present Worth of Arithmetic Gradient Amounts
Noncontinuous Arithmetic Gradient Series
Using Factor Tables to Solve for Gradients
Perpetual Life Gradients¾ Infinite Series
Geometric Gradients
Using Factor Tables to Solve for Gradients
Summary
Key Terms
Problems
Multiple Factors
Combining Factors to Solve for Future or Present Worth of Different Series
Two Sequential Series with Different Interest Rates
Compounding Periods Not Equal to Payment Periods
Summary
Key Terms
Problems
Present Worth Capitalized Cost Analysis¾ Present Worth Method of Comparing Alternatives
Comparing Alternatives on the Basis of Equivalent Present Worth
Capitalized Cost Calculations for Perpetual Life Series
Present Worth of Least Common Multiples of Series
Summary
Key Terms
Problems
Equivalent Uniform Annual Cost Comparison Method
Comparing Alternatives Based on their Equivalent Uniform Annual Cost
Equivalent Uniform Annual Cost of Perpetual Life Alternatives
Using Trade-in Value and Sunk Costs in Calculations
Summary
Key Terms
Problems
Rate or Return Method for Comparing Alternatives
Solving for the Interest Rate where the Present Sum Equals the Future Sum
Solving for the Unknown Interest Rate using Interpolation
Evaluation by Incremental Investment Analysis¾ Incremental Rate of Return
Summary
Key Terms
Problems
Replacement Analysis
Definitions used in Replacement Analysis
Determining when to Replace an Asset
Analyzing Mutually Exclusive Alternatives
Summary
Key Terms
Problems
Breakeven Analysis Comparisons
Fixed Costs and Variable Costs
Locating the Breakeven Point
Summary
Key Terms
Problems
Benefit/Cost Evaluations
Definition of Terms used in Benefit/Cost Evaluations
Benefit/Cost Ratio Analysis
Summary
Key Terms
Problems
Depreciation
Definition of Deprecation
Components Considered when Calculating Depreciation
Methods for Calculating Depreciation
Summary
Key Terms
Problems
Taxes and After Tax Economic Analysis
Corporate Taxes
After Tax Cash Flows
Individual Taxes
Summary
Key Terms
Problems
Appendix I Summary of Equations and Cash Flow Diagrams
Appendix II Factor Tables
Appendix III Using Spreadsheets to Solve Engineering Economic Problems
Index
Biography
J. K. Yates, PhD, BSCE, is a construction consultant, and former Professor and the Program Coordinator for the Construction Engineering Program in the Department of Civil Engineering at San Jose State University, as well as having been the associate editor of the Project Management Institute's (PMI) Project Management Journal for ten years. Dr. Yates has extensive hands-on experience working globally for companies such as Bechtel, Williams Engineering, CH2M Hill Consulting Engineers, and Morrison- Knudsen. A member of the American Society of Civil Engineers, PMI, and the American Association of Cost Engineers International, Dr. Yates has published over forty-five refereed journal articles on construction engineering, project management, and international engineering and construction. Dr. Yates was awarded the Ron Brown Presidential Award for Industry-Education Partnership, May 2000, and was also awarded by President Clinton for research collaboration with the Hewlett Packard Foundation. Dr. Yates also received the President's Special Recognition Award, December 1996, awarded by the president of San Jose State University. The Associated General Contractors (AGC) selected Dr. Yates as the Outstanding Educator in Construction in America in 1997, and the Engineering News-Record selected Dr. Yates as One of Those Who Made Their Mark in Construction in 1991.
"Probably the best text available on engineering economics for construction education. Written in a very no-nonsense manner with a heavy emphasis on understanding the formulas and what they mean as opposed to just filling in the blanks."
—David W. Martin, Central Washington University, Ellensburg, Washington, USA"This book covers relevant topics in engineering: the economics of decision making, and the cost of money over time. Every concept is fully explained and the rigor is incrementally incorporated to the text, so it is actually a pleasant book to read. This book will be of great interest not only to engineers but to other decision makers in the delivery of capital projects. It goes beyond the economic evaluation of projects, by providing a deep and clear explanation of associated topics such as taxes and accounting."
— Daniel Castro-Lacouture, Georgia Institute of Technology, Atlanta, Georgia, USA
