**Engineering Economy 8th Edition by Leland Blank, ISBN-13: 978-1260152814**

[PDF eBook eTextbook]

- Publisher: McGraw Hill; 8th edition (February 2, 2017)
- Language: English
- 656 pages
- ISBN-10: 1260152812
- ISBN-13: 978-1260152814

* Engineering Economy* presents a crisp, bold new design using color, highlighting and icons to focus on important concepts, terms, equations and decision guidelines. There are new features, new topics (such as ethics and staged decision making), and new online tools; yet no compromise on coverage, examples, or the well-accepted writing style of this popular text. Solved examples, problems and case studies target many of the current engineering challenges in areas such as

*, ethics, the environment, and the world’s changing economics.*

**energy****Table of Contents:**

Preface to Eighth Edition xiv

LEARNING

STAGE 1

THE FUNDAMENTALS

Chapter 1 Foundations of Engineering Economy 2

1.1 Why Engineering Economy and the Time Value of Money are Important 3

1.2 Performing an Engineering Economy Study 5

1.3 Professional Ethics and Economic Decisions 7

1.4 Interest Rate and Rate of Return 10

1.5 Terminology and Symbols 14

1.6 Cash Flows: Estimation and Diagramming 15

1.7 Economic Equivalence 19

1.8 Simple and Compound Interest 22

1.9 Minimum Attractive Rate of Return 26

1.10 Introduction to Spreadsheet Use 27

Chapter Summary 31

Problems 31

Exercises for Spreadsheets 35

Additional Problems and FE Exam Review Questions 36

Case Study—Cost of Electricity with Renewable Sources Added 37

Chapter 2 Factors: How Time and Interest Affect Money 38

PE Progressive Example—The Steel Plant Case 39

2.1 Single-Amount Factors (F∕P and P∕F ) 39

2.2 Uniform Series Present Worth Factor and Capital Recovery

Factor (P∕A and A∕P) 43

2.3 Sinking Fund Factor and Uniform Series Compound Amount

Factor (A∕F and F∕A) 46

2.4 Factor Values for Untabulated i or n Values 48

2.5 Arithmetic Gradient Factors (P∕G and A∕G) 50

2.6 Geometric Gradient Series Factors 58

2.7 Determining i or n for Known Cash Flow Values 61

Chapter Summary 64

Problems 64

Exercises for Spreadsheets 68

Additional Problems and FE Exam Review Questions 69

Case Study—The Amazing Impact of Compound Interest 71

Chapter 3 Combining Factors and Spreadsheet Functions 72

3.1 Calculations for Uniform Series That Are Shifted 73

3.2 Calculations Involving Uniform Series and Randomly Placed Single Amounts 76

3.3 Calculations for Shifted Gradients 80

Chapter Summary 86

Problems 86

Exercises for Spreadsheets 92

Additional Problems and FE Exam Review Questions 93

Case Study—Preserving Land for Public Use 94

Chapter 4 Nominal and Effective Interest Rates 96

PE Progressive Example—The Credit Card Offer Case 97

4.1 Nominal and Effective Interest Rate Statements 98

4.2 Effective Annual Interest Rates 101

4.3 Effective Interest Rates for Any Time Period 107

4.4 Equivalence Relations: Payment Period

and Compounding Period 108

4.5 Equivalence Relations: Single Amounts with PP ≥ CP 109

4.6 Equivalence Relations: Series with PP ≥ CP 111

4.7 Equivalence Relations: Single Amounts and Series

with PP < CP 115

4.8 Effective Interest Rate for Continuous Compounding 116

4.9 Interest Rates That Vary Over Time 118

Chapter Summary 120

Problems 120

Exercises for Spreadsheets 125

Additional Problems and FE Exam Review Questions 125

Case Study—Is Owning a Home a Net Gain or Net Loss Over Time? 127

LEARNING

STAGE 2

BASIC ANALYSIS TOOLS

Chapter 5 Present Worth Analysis 130

PE Progressive Example—Water for Semiconductor

Manufacturing Case 131

5.1 Formulating Alternatives 131

5.2 Present Worth Analysis of Equal-Life Alternatives 133

5.3 Present Worth Analysis of Different-Life Alternatives 135

5.4 Future Worth Analysis 139

5.5 Capitalized Cost Analysis 140

Chapter Summary 144

Problems 144

Exercises for Spreadsheets 149

Additional Problems and FE Exam Review Questions 150

Case Study—Comparing Social Security Benefits 152

Chapter 6 Annual Worth Analysis 154

6.1 Advantages and Uses of Annual Worth Analysis 155

6.2 Calculation of Capital Recovery and AW Values 157

6.3 Evaluating Alternatives by Annual Worth Analysis 159

6.4 AW of a Permanent Investment 161

6.5 Life-Cycle Cost Analysis 164

Chapter Summary 168

Problems 168

Exercises for Spreadsheets 173

Additional Problems and FE Exam Review Questions 175

Case Study—Annual Worth Analysis—Then and Now 176

Chapter 7 Rate of Return Analysis: One Project 178

7.1 Interpretation of a Rate of Return Value 179

7.2 Rate of Return Calculation Using a PW or AW Relation 181

7.3 Special Considerations When Using the ROR Method 185

7.4 Multiple Rate of Return Values 186

7.5 Techniques to Remove Multiple Rates of Return 191

7.6 Rate of Return of a Bond Investment 197

Chapter Summary 200

Problems 200

Exercises for Spreadsheets 205

Additional Problems and FE Exam Review Questions 207

Case Study—Developing and Selling an Innovative Idea 209

Chapter 8 Rate of Return Analysis: Multiple Alternatives 210

8.1 Why Incremental Analysis Is Necessary 211

8.2 Calculation of Incremental Cash Flows for ROR Analysis 211

8.3 Interpretation of Rate of Return on the Extra Investment 214

8.4 Rate of Return Evaluation Using PW: Incremental and Breakeven (Two Alternatives) 215

8.5 Rate of Return Evaluation Using AW 221

8.6 Incremental ROR Analysis of Multiple (More than Two) Alternatives 222

8.7 All-in-One Spreadsheet Analysis 226

Chapter Summary 228

Problems 228

Exercises for Spreadsheets 233

Additional Problems and FE Exam Review Questions 234

Case Study—Peforming ROR Analysis for 3D Printer and IIoT Technology 235

Case Study—How a New Engineering Graduate Can Help His Father 236

Chapter 9 Benefit/Cost Analysis and Public Sector Economics 238

PE Progressive Example—Water Treatment Facility #3 Case 239

9.1 Public Sector Projects 240

9.2 Benefit/Cost Analysis of a Single Project 245

9.3 Incremental B/C Analysis (Two Alternatives) 248

9.4 Incremental B/C Analysis of Multiple (More than Two) Alternatives 252

9.5 Service Sector Projects and Cost-Effectiveness Analysis 256

9.6 Ethical Considerations in the Public Sector 260

Chapter Summary 261

Problems 262

Exercises for Spreadsheets 269

Additional Problems and FE Exam Review Questions 270

Case Study—Highway Lighting Options to Reduce Traffic Accidents 272

LEARNING

STAGE 2 EPILOGUE: SELECTING THE BASIC ANALYSIS TOOL

LEARNING

STAGE 3 MAKING BETTER DECISIONS

Chapter 10 Project Financing and Noneconomic Attributes 278

10.1 MARR Relation to the Cost of Capital 279

10.2 Debt-Equity Mix and Weighted Average Cost of Capital 281

10.3 Determination of the Cost of Debt Capital 283

10.4 Determination of the Cost of Equity Capital and the MARR 285

10.5 Effect of Debt-Equity Mix on Investment Risk 287

10.6 Multiple Attribute Analysis: An Introduction 290

10.7 Evaluation Measure for Multiple Attributes 294

Chapter Summary 295

Problems 296

Exercises for Spreadsheets 301

Additional Problems and FE Exam Review Questions 302

Case Study—Expanding a Business—Debt vs. Equity Financing? 303

Chapter 11 Replacement and Retention Decisions 304

PE Progressive Example—Keep or Replace the Kiln Case 305

11.1 Basics of a Replacement Study 306

11.2 Economic Service Life 308

11.3 Performing a Replacement Study 314

11.4 Additional Considerations in a Replacement Study 318

11.5 Replacement Study over a Specified Study Period 319

11.6 Replacement Value 324

Chapter Summary 324

Problems 325

Exercises for Spreadsheets 331

Additional Problems and FE Exam Review Questions 331

Case Study—A Pumper System with an ESL Problem 333

Chapter 12 Independent Projects with Budget Limitation 334

12.1 An Overview of Capital Rationing among Projects 335

12.2 Capital Rationing Using PW Analysis of Equal-Life Projects 337

12.3 Capital Rationing Using PW Analysis of Unequal-Life Projects 339

12.4 Capital Budgeting Problem Formulation Using Linear Programming 341

12.5 Additional Project Ranking Measures 344

Chapter Summary 346

Problems 346

Additional Problems and FE Exam Review Questions 351

Chapter 13 Breakeven and Payback Analysis 354

13.1 Breakeven Analysis for a Single Project 355

13.2 Breakeven Analysis Between Two Alternatives 359

13.3 Payback Analysis 362

13.4 More Breakeven and Payback Analysis on Spreadsheets 366

Chapter Summary 369

Problems 369

Exercises for Spreadsheets 374

Additional Problems and FE Exam Review Questions 375

Case Study—Water Treatment Plant Process Costs 376

LEARNING

STAGE 4

ROUNDING OUT THE STUDY

Chapter 14 Effects of Inflation 380

14.1 Understanding the Impact of Inflation 381

14.2 Present Worth Calculations Adjusted for Inflation 383

14.3 Future Worth Calculations Adjusted for Inflation 388

14.4 Capital Recovery Calculations Adjusted for Inflation 391

Chapter Summary 392

Problems 392

Additional Problems and FE Exam Review Questions 398

Case Study—Inflation Considerations for Stock

and Bond Investments 399

Chapter 15 Cost Estimation and Indirect Cost Allocation 400

15.1 Understanding How Cost Estimation Is Accomplished 401

15.2 Unit Method 404

15.3 Cost Indexes 405

15.4 Cost-Estimating Relationships: Cost-Capacity Equations 408

15.5 Cost-Estimating Relationships: Factor Method 409

15.6 Indirect Cost Rates and Allocation: The Traditional Method 411

15.7 Activity-Based Costing (ABC) for Indirect Costs 415

15.8 Making Estimates and Maintaining Ethical Practices 417

Chapter Summary 418

Problems 418

Additional Problems and FE Exam Review Questions 424

Case Study—Indirect Cost Analysis of Medical Equipment Manufacturing Costs 425

Case Study—Deceptive Acts Can Get You in Trouble 427

Chapter 16 Depreciation Methods 428

16.1 Depreciation Terminology 429

16.2 Straight Line (SL) Depreciation 432

16.3 Declining Balance (DB) and Double Declining Balance (DDB) Depreciation 433

16.4 Modified Accelerated Cost Recovery System (MACRS) 436

16.5 Determining the MACRS Recovery Period 440

16.6 Depletion Methods 441

Chapter Summary 443

Appendix 444

16A.1 Sum-of-Years-Digits (SYD) and Unit-of-Production (UOP) Depreciation 444

16A.2 Switching between Depreciation Methods 446

16A.3 Determination of MACRS Rates 449

Problems 452

Additional Problems and FE Exam Review Questions 455

Appendix Problems 456

Chapter 17 After-Tax Economic Analysis 458

17.1 Income Tax Terminology and Basic Relations 459

17.2 Calculation of Cash Flow after Taxes 462

17.3 Effect on Taxes of Different Depreciation Methods and

Recovery Periods 464

17.4 Depreciation Recapture and Capital Gains (Losses) 467

17.5 After-Tax Economic Evaluation 470

17.6 After-Tax Replacement Study 476

17.7 After-Tax Value-Added Analysis 479

17.8 After-Tax Analysis for International Projects 482

17.9 Value-Added Tax 484

Chapter Summary 486

Problems 487

Additional Problems and FE Exam Review Questions 496

Case Study—After-Tax Analysis for Business Expansion 497

Chapter 18 Sensitivity Analysis and Staged Decisions 498

18.1 Determining Sensitivity to Parameter Variation 499

18.2 Sensitivity Analysis Using Three Estimates 504

18.3 Estimate Variability and the Expected Value 505

18.4 Expected Value Computations for Alternatives 506

18.5 Staged Evaluation of Alternatives Using a Decision Tree 508

18.6 Real Options in Engineering Economics 512

Chapter Summary 517

Problems 517

Additional Problems and FE Exam Review Questions 524

Case Study—Sensitivity to the Economic Environment 525

Case Study—Sensitivity Analysis of Public Sector Projects—Water Supply Plans 525

Chapter 19 More on Variation and Decision Making under Risk 528

19.1 Interpretation of Certainty, Risk, and Uncertainty 529

19.2 Elements Important to Decision Making under Risk 532

19.3 Random Samples 537

19.4 Sample Estimates: Mean and Standard Deviation 540

19.5 Monte Carlo Sampling and Simulation Analysis 547

Chapter Summary 554

Problems 554

Additional Problems and FE Exam Review Questions 558

Case Study—Using Simulation and Three-Estimate Sensitivity Analysis 559

Appendix A Using Spreadsheets and Microsoft Excel® 561

A.1 Introduction to Using Excel 561

A.2 Organization (Layout) of the Spreadsheet 563

A.3 Spreadsheet Functions Important to Engineering

Economy (Alphabetical Order) 564

A.4 Goal Seek—A Tool for Breakeven and Sensitivity Analysis 572

A.5 Solver—An Optimizing Tool for Capital Budgeting, Breakeven,

and Sensitivity Analysis 573

A.6 Error Messages 574

Appendix B Basics of Accounting Reports and Business Ratios 575

B.1 The Balance Sheet 575

B.2 Income Statement and Cost of Goods Sold Statement 576

B.3 Business Ratios 577

Appendix C Code of Ethics for Engineers 580

Appendix D Alternate Methods for Equivalence Calculations 583

D.1 Using Programmable Calculators 583

D.2 Using the Summation of a Geometric Series 584

Appendix E Glossary of Concepts and Terms 587

E.1 Important Concepts and Guidelines 587

E.2 Symbols and Terms 590

Reference Materials 593

Factor Tables 595

Index 624

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