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Cover

Engineering Economic Analysis

Twelfth Edition

Donald G. Newnan, Jerome P. Lavelle, and Ted G. Eschenbach

Publication Date - November 2013

ISBN: 9780199339273

704 pages
Hardcover
7-1/2 x 9-1/4 inches

In Stock

Retail Price to Students: $125.00

Easy to understand. Easy to teach. Easy to afford.

Description

The twelfth edition of the market-leading Engineering Economic Analysis offers comprehensive coverage of financial and economic decision making for engineers, with an emphasis on problem solving, life-cycle costs, and the time value of money. The authors' concise, accessible writing, practical emphasis, and contemporary examples linked to students' everyday lives make this text the most popular among students. In addition, with its extensive support package and logical progression of topics, this is the easiest book to teach from.

New to the Twelfth Edition

* 500 new or revised problems--answers to most even problems now in Appendix E
* Six new and nine updated chapter-opening vignettes provide extended real-world examples
* Twenty new Excel tutorial videos added to the updated set of thirty-six from the eleventh edition
* New visual "five-button solutions" help simplify the use of spreadsheets and calculators
* A new Appendix 12A aggregates coverage of personal income taxes, which now includes time value of money problems

INSTRUCTOR SUPPORT PACKAGE

* An Instructor's Manual including full solutions to all text problems in print format
* An updated and expanded set of supplemental materials, including new test questions, as well as the solutions to the Cases in Engineering Economy, 2E, text available on Oxford's Ancillary Resource Center. Please contact your Oxford University Press sales representative for access.
* Two PowerPoint-based lecture resources: Fully customizable PowerPoint-based lecture outlines, ready for immediate use or modification, and slides of every figure and table in the text
* Learning Management System support: Most of the electronic ancillaries are available as pre-formatted cartridges for upload into a learning management system

Instructor Support Package available to adopters of the twelfth edition (not included with book, available separately)


STUDENT SUPPORT PACKAGE

* Free casebook: In-text CD includes Cases in Engineering Economy, 2E, a collection of fifty-four case studies designed to help students apply the theories and concepts of engineering economy to real-world situations
* Study Guide: Packaged with every copy of the student text; contains practice questions with detailed solutions for every chapter in the text
* Companion Website (www.oup.com/us/newnan) featuring:
* 100 additional sample FE exam problems
* Interactive tutorial questions for many chapters
* Video tutorials for Microsoft Excel, explaining how to use Excel to work specific financial calculations
* Updated interactive spreadsheet models

Student Support Package available to adopters of the twelfth edition (not included with book, available separately)

About the Author(s)

Donald G. Newnan is Professor Emeritus of Industrial and Systems Engineering at San Jose State University.

Jerome P. Lavelle is Associate Dean in the College of Engineering at North Carolina State University.

Ted G. Eschenbach is a consultant and Professor Emeritus of Engineering Management at the University of Alaska Anchorage.

Previous Publication Date(s)

November 2013
February 2011
July 2009

Reviews

"It is the standard."--Bill McManus, University of Oklahoma

"An excellent text. The best available."--Nicholas Sylvester, University of South Alabama

Table of Contents

    1: MAKING ECONOMIC DECISIONS
    A Sea of Problems
    Simple Problems
    Intermediate Problems
    Complex Problems
    The Role of Engineering Economic Analysis
    Examples of Engineering Economic Analysis
    The Decision-Making Process
    Rational Decision Making
    Engineering Decision Making for Current Costs

    2: ENGINEERING COSTS AND COST ESTIMATING
    Engineering Costs
    Fixed, Variable, Marginal, and Average Costs
    Sunk Costs
    Opportunity Costs
    Recurring and Nonrecurring Costs
    Incremental Costs
    Cash Costs Versus Book Costs
    Life-Cycle Costs
    Cost Estimating
    Types of Estimate
    Difficulties in Estimation
    Estimating Models
    Per-Unit Model
    Segmenting Model
    Cost Indexes
    Power-Sizing Model
    Triangulation
    Improvement and the Learning Curve
    Estimating Benefits
    Cash Flow Diagrams
    Categories of Cash Flows
    Drawing a Cash Flow Diagram
    Drawing Cash Flow Diagrams with a Spreadsheet

    3: INTEREST AND EQUIVALENCE
    A Prescription for Success
    Computing Cash Flows
    Time Value of Money
    Simple Interest
    Compound Interest
    Repaying a Debt
    Equivalence
    Difference in Repayment Plans
    Equivalence Is Dependent on Interest Rate
    Single Payment Compound Interest Formulas
    Nominal and Effective Interest
    Continuous Compounding
    Single Payment Interest Factors: Continuous Compounding

    4. EQUIVALENCE FOR REPEATED CASH FLOWS
    Uniform Series Compound Interest Formulas
    Expanded Factors as Calculator Functions
    Cash Flows that Do Not Match Basic Patterns
    Economic Equivalence Viewed as a Moment Diagram
    Relationships Between Compound Interest Factors
    Single Payment
    Uniform Series
    Arithmetic Gradient
    Derivation of Arithmetic Gradient Factors
    Reality and the Assumed Uniformity of A, G, and g.
    Geometric Gradient
    Compounding Period and Payment Period Differ
    Spreadsheets for Economic Analysis
    Spreadsheet Annuity Functions for Cash Flow Tables
    Spreadsheet Block Functions
    Using Spreadsheets for Basic Graphing

    5: PRESENT WORTH ANALYSIS
    Assumptions in Solving Economic Analysis Problems
    End-of-Year Convention
    Viewpoint of Economic Analysis Studies
    Sunk Costs
    Borrowed Money Viewpoint
    Effect of Inflation and Deflation
    Income Taxes
    Economic Criteria
    Applying Present Worth Techniques
    Useful Lives Equal the Analysis Period
    Useful Lives Different from the Analysis Period
    Infinite Analysis Period: Capitalized Cost
    Multiple Alternatives
    Bond Pricing
    Spreadsheets and Present Worth

    6: ANNUAL CASH FLOW ANALYSIS
    Lowest Prices on the Net! Buy Now!
    Annual Cash Flow Calculations
    Resolving a Present Cost to an Annual Cost
    Treatment of Salvage Value
    Annual Cash Flow Analysis
    Analysis Period
    Analysis Period Equal to Alternative Lives
    Analysis Period a Common Multiple of Alternative Lives
    Analysis Period for a Continuing Requirement
    Infinite Analysis Period: Capitalized Cost
    Multiple Alternatives
    Using Spreadsheets to Analyze Loans
    Building an Amortization Schedule
    How Much to Interest? How Much to Principal?
    Finding the Balance Due on a Loan
    Pay off Debt Sooner by Increasing Payments

    7: RATE OF RETURN ANALYSIS
    Bar Codes Give a Number; RFID Codes Tell A Story
    Internal Rate of Return
    Calculating Rate of Return
    Plot of NPW versus Interest Rate
    Interest Rates When There are Fees or Discounts
    Loans and Investments are Everywhere
    Incremental Analysis
    Present Worth Analysis
    Analysis Period
    Spreadsheets and Rate of Return Analysis
    Summary
    Problems
    Appendix 7A: Difficulties in Solving for an Interest Rate
    Why Multiple Solutions Can Occur
    Modified Internal Rate of Return (MIRR)

    8: Choosing the Best Alternative
    Tapping Into Geometry
    Incremental Analysis
    Graphical Solutions
    Elements in Comparing Mutually Exclusive Alternatives
    Doing a Set of Incremental Challenger-Defender Comparisons
    Choosing an Analysis Method
    Spreadsheets and Goal Seek

    9: OTHER ANALYSIS TECHNIQUES
    Clean, Green, and Far Between
    Future Worth Analysis
    Benefit-Cost Ratio Analysis
    Variations on the Theme of Benefit-Cost Ratio
    Payback Period
    Sensitivity and Breakeven Analysis
    Graphing with Spreadsheets for Sensitivity and Breakeven Analysis
    Doing What-If Analysis with Spreadsheets

    10: UNCERTAINTY IN FUTURE EVENTS
    They Only Thought They Were Done
    Estimates and Their Use in Economic Analysis
    A Range of Estimates
    Probability
    Joint Probability Distributions
    Expected Value
    Economic Decision Trees
    Risk
    Risk Versus Return
    Simulation
    Real Options

    11: DEPRECIATION
    Depreciation and Competitiveness
    Basic Aspects of Depreciation
    Deterioration and Obsolescence
    Depreciation and Expenses
    Types of Property
    Depreciation Calculation Fundamentals
    Historical Depreciation Methods
    Straight-Line Depreciation
    Sum-of-Years'-Digits Depreciation
    Declining Balance Depreciation
    Modified Accelerated Cost Recovery System (MACRS)
    Cost Basis and Placed-in-Service Date
    Property Class and Recovery Period
    Percentage Tables
    Where MACRS Percentage Rates (rt ) Come From
    MACRS Method Examples
    Comparing MACRS and Historical Methods
    Depreciation and Asset Disposal
    Unit-of-Production Depreciation
    Depletion
    Cost Depletion
    Percentage Depletion
    Spreadsheets and Depreciation
    Using VDB for MACRS

    12: INCOME TAXES
    On With the Wind
    A Partner in the Business.
    Calculation of Taxable Income
    Taxable Income of Individuals
    Classification of Business Expenditures
    Taxable Income of Business Firms
    Income Tax Rates
    Individual Tax Rates
    Corporate Tax Rates
    Combined Federal and State Income Taxes
    Selecting an Income Tax Rate for Economy Studies
    Economic Analysis Taking Income Taxes into Account
    Capital Gains and Losses for Nondepreciated Assets
    Investment Tax Credit
    Estimating the After-Tax Rate of Return
    After-Tax Cash Flows and Spreadsheets
    Appendix 12A: Personal Finance

    13: REPLACEMENT ANALYSIS
    The Replacement Problem
    Replacement Analysis Decision Map
    Minimum Cost Life of a New Asset --- the Challenger
    Do We Have Marginal Cost Data For the Defender?
    Are These Marginal Costs Increasing?
    Replacement Analysis Technique 1: Defender Marginal Costs Can Be Computed and
    Are Increasing
    Replacement Repeatability Assumptions
    Replacement Analysis Technique 2: Defender Marginal Costs Can Be Computed and Are Not Increasing
    Replacement Analysis Technique 3: When Defender Marginal Cost Data Are Not Available
    Complications in Replacement Analysis
    Defining Defender and Challenger First Costs
    Repeatability Assumptions Not Acceptable
    A Closer Look at Future Challengers
    After-Tax Replacement Analysis
    Marginal Costs on an After-Tax Basis
    Minimum Cost Life Problems
    Spreadsheets and Replacement Analysis

    14: INFLATION AND PRICE CHANGE
    The Athabasca Oil Sands
    Meaning and Effect of Inflation
    How Does Inflation Happen?
    Definitions for Considering Inflation in Engineering Economy
    Analysis in Constant Dollars Versus Then-Current Dollars
    Price Change with Indexes
    What Is a Price Index?
    Composite Versus Commodity Indexes
    How to Use Price Indexes in Engineering Economic Analysis
    Cash Flows That Inflate at Different Rates
    Different Inflation Rates per Period
    Inflation Effect on After-Tax Calculations
    Using Spreadsheets for Inflation Calculations

    15: SELECTION OF A MINIMUM ATTRACTIVE RATE OF RETURN
    BP Goes to Russia
    Sources of Capital
    Money Generated from the Firm's Operation
    External Sources of Money
    Choice of Source of Funds
    Cost of Funds
    Cost of Borrowed Money
    Cost of Capital
    Inflation and the Cost of Borrowed Money
    Investment Opportunities
    Opportunity Cost
    Selecting a Minimum Attractive Rate of Return
    Adjusting MARR to Account for Risk and Uncertainty
    Representative Values of MARR Used in Industry
    Capital Budgeting or Selecting the Best Projects
    Spreadsheets, Cumulative Investments, and the Opportunity Cost of Capital

    16: ECONOMIC ANALYSIS IN THE PUBLIC SECTOR
    From Waste to Power and Money
    Investment Objective
    Viewpoint for Analysis
    Selecting an Interest Rate
    No Time-Value-of-Money Concept
    Cost of Capital Concept
    Opportunity Cost Concept
    Recommended Concept
    The Benefit-Cost Ratio
    Incremental Benefit-Cost Analysis
    Elements of the Incremental Benefit-Cost Ratio Method
    Other Effects of Public Projects
    Project Financing
    Project Duration
    Quantifying and Valuing Benefits and Disbenefits
    Project Politics

    17: ACCOUNTING AND ENGINEERING ECONOMY
    The Two Faces of ABB
    The Role of Accounting
    Accounting for Business Transactions
    The Balance Sheet
    Assets
    Liabilities
    Equity
    Financial Ratios Derived from Balance Sheet Data
    The Income Statement
    Financial Ratios Derived from Income Statement Data
    Linking the Balance Sheet, Income Statement, and Capital Transactions
    Traditional Cost Accounting
    Direct and Indirect Costs
    Indirect Cost Allocation
    Problems with Traditional Cost Accounting
    Other Problems to Watch For

    Appendix A: Introduction to Spreadsheets
    The Elements of a Spreadsheet
    Defining Variables in a Data Block
    Copy Command
    Appendix B: Time Value of Money (TVM) Calculators
    Notation for TVM Calculators
    Examples with TVM Calculators and Tabulated Factors
    Problems
    Appendix C: Compound Interest Tables
    Appendix D: Fundamentals of Engineering (FE) Examination Problems

    References
    Index

Teaching Resources

  • An Instructor's Manual including full solutions to all text problems in print format
  • An updated and expanded set of supplemental materials, including new test questions, as well as the solutions to the Cases in Engineering Economy, 2E, text available on Oxford's Ancillary Resource Center. Please contact your Oxford University Press sales representative for access.
  • Two PowerPoint-based lecture resources: Fully customizable PowerPoint-based lecture outlines, ready for immediate use or modification, and slides of every figure and table in the text
  • Learning Management System support: Most of the electronic ancillaries are available as pre-formatted cartridges for upload into a learning management system

STUDENT SUPPORT PACKAGE
  • Free casebook: In-text CD includes Cases in Engineering Economy, 2E, a collection of fifty-four case studies designed to help students apply the theories and concepts of engineering economy to real-world situations
  • Study Guide: Packaged with every copy of the student text; contains practice questions with detailed solutions for every chapter in the text
  • Companion Website (www.oup.com/us/newnan) featuring: 100 additional sample FE exam problems, Interactive tutorial questions for many chapters, Video tutorials for Microsoft Excel, explaining how to use Excel to work specific financial calculations, Updated interactive spreadsheet models

Related Titles

Engineering Economy
 
Cases in Engineering Economy

Cases in Engineering Economy

Second Edition

William R Peterson and Ted G Eschenbach