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About the Book

Users of the first two editions, reviewers specifically chosen for this revision, and colleagues and coauthors for other texts and articles in engineering economy have suggested the following improvements.

  • Cases in Engineering Economy 2nd by Peterson and Eschenbach, with contributed cases from 13 others, is on the student CD that comes with this text. Specific cases are suggested at the end of each chapter’s list of problems.

  • A new Appendix B supports the use of financial calculators. This coverage conceptually matches the use of the tabulated factors, but it allows students to focus more on concepts by reducing the time needed for financial arithmetic.

  • Ethics has been added to the material on decision-making in Chapter 1.

  • The use of uniform flow and gradient assumptions in feasibility and preliminary economic analysis has been emphasized in Chapter 3.

  • The flexibility of spreadsheets to more accurately model reality is emphasized in Chapter 4.

  • Chapter 4 introduces breakeven and what-if analyses. (If instructors need to skip parts of the book, this coverage makes it possible to skip Chapters 8 and 17 and to still include basic sensitivity analysis.)

  • Chapter 5 now includes a simple formula for a perpetual geometric gradient, as well as the formulas for a perpetual arithmetic gradient and a perpetual annual series.

  • Chapter 10 now includes a spreadsheet approach that greatly simplifies the task of finding the optimal economic life.

  • Chapter 11 now addresses one approach for including mutually exclusive alternatives in the investment opportunity schedule by breaking them into incremental investments.

  • Chapter 12 now includes the 50% initial “bonus” depreciation that has been used to stimulate economic activity.

  • Chapter 13 now includes a 1-period example that provides a clearer and simpler introduction to leverage.

  • Chapter 14 now opens with an exhibit that provides multiple examples of benefits and disbenefits for public projects.

  • Chapter 17 now includes a section on creating tornado diagrams, and the student website includes the file TornadoTemplateEschenbach3rd.xls.

  • Chapter 18 now includes a section that provides an overview of real options.

  • Appendix A has completely revamped examples and problems that more realistically reflect typical firms.

  • Appendix D has been added to provide a set of practice problems for the FE exam.

  • The addition of more and more difficult problems within most problem sets.

  • Numerous improvements in wording, in the numerical results of examples and problems, and in the exhibits used to illustrate concepts.


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