Engineering Economy and Corporate Finance

University ePrep Course by

Nanyang Technological University

Engineering Economy Topics

Engineering Economy – The Details Topics

CHAPTER 1 Introduction to Engineering Economy

1.1 Introduction

1.2 The Principles of Engineering Economy

1.3. Engineering Economy and the Design Process

1.4 Using Spreadsheets in Engineering Economic Analysis

CHAPTER 2 Cost Concepts and Design Economics

2.1 Cost Terminology

2.2 The General Economic Environment

2.3 Cost-Driven Design Optimization

2.4 Present Economy Studies

2.5 Case Study—The Economics of Daytime Running Lights

CHAPTER 3 Cost-Estimation Techniques

3.1 Introduction

3.2 An Integrated Approach

3.3 Selected Estimating Techniques (Models)

3.4 Parametric Cost Estimating

3.5 Case Study—Demanufacturing of Computers

3.6 Electronic Spreadsheet Modeling: Learning Curve

CHAPTER 4 The Time Value of Money

4.1 Introduction

4.2 Simple Interest

4.3 Compound Interest

4.4 The Concept of Equivalence

4.5 Notation and Cash-Flow Diagrams and Tables

4.6 Relating Present and Future Equivalent Values of Single Cash Flows

4.7 Relating a Uniform Series (Annuity) to Its Present and Future Equivalent Values

4.8 Summary of Interest Formulas and Relationships for Discrete Compounding,

4.9 Deferred Annuities (Uniform Series)

4.10 Equivalence Calculations Involving Multiple Interest Formulas

4.11 Uniform (Arithmetic) Gradient of Cash Flows

4.12 Geometric Sequences of Cash Flows

4.13 Interest Rates that Vary with Time

4.14 Nominal and Effective Interest Rates

4.15 Compounding More Often than Once per Year

4.16 Interest Formulas for Continuous Compounding and Discrete Cash Flows

4.17 Case Study—Understanding Economic “Equivalence”

CHAPTER 5 Evaluating a Single Project

5.1 Introduction

5.2 Determining the Minimum Attractive Rate of Retum (MARR)

5.3. The Present Worth Method

5.4 The Future Worth Method

5.5 The Annual Worth Method

5.6 The Internal Rate of Return Method

5.7 The External Rate of Return Method

5.8 The Payback (Payout) Period Method

5.9 Case Study—A Proposed Capital Investment to Improve Process Yield

5.10 Electronic Spreadsheet Modeling: Payback Period Method

CHAPTER 6 Comparison and Selection among Alternatives

6.1 Introduction

6.2 Basic Concepts for Comparing Alternatives

6.3 The Study (Analysis) Period

6.4 Useful Lives Are Equal to the Study Period

6.5 Useful Lives Are Unequal among the Alternatives

6.6 Personal Finances

6.7 Case Study—Ned and Larry’s Ice Cream Company

6.8 Post-evaluation of Results

6.9 Project Post-evaluation Spreadsheet Approach

CHAPTER 7 Depreciation and Income Taxes

7.1 Introduction

7.2 Depreciation Concepts and Terminology

7.3 The Classical (Historical) Depreciation Methods

7.4 The Modified Accelerated Cost Recovery System

7.5 | A Comprehensive Depreciation Example

7.6 Introduction to Income Taxes

7.7 The Effective (Marginal) Corporate Income Tax Rate

7.8 Gain (Loss) on the Disposal of an Asset

7.9 General Procedure for Making After-Tax Economic Analyses

7.10 Illustration of Computations of After Tax Cash Flows

7.11 Economic Value Added

CHAPTER 8 Price Changes and Exchange Rates

8.1 Introduction

8.2 Terminology and Basic Concepts

8.3 Fixed and Responsive Annuities

8.4 Differential Price Changes

8.5 Spreadsheet Application

8.6 Foreign Exchange Rates and Purchasing Power Concepts

8.7 Case Study—Selecting Electric Motors to Power an Assembly Line

CHAPTER 9 Replacement Analysis

9.1 Introduction

9.2 Reasons for Replacement Analysis

9.3. Factors that Must Be Considered in Replacement Studies

9.4 Typical Replacement Problems

9.5 Determining the Economic Life of a New Asset (Challenger)

9.6 Determining the Economic Life of a Defender

9.7 Comparisons in Which the Defender’s Useful Life Differs from that of the Challenger

9.8 Retirement without Replacement (Abandonment)

9.9 — After-Tax Replacement Studies

9.10 Case Study—Replacement of a Hospital’s Emergency Electrical Supply System

CHAPTER 10 Evaluating Projects with the Benefit—Cost Ratio Method

10.1 Introduction

10.2 Perspective and Terminology for Analyzing Public Projects

10.3 Self-Liquidating Projects

10.4 Multiple-Purpose Projects

10.5 Difficulties in Evaluating Public-Sector Projects

10.6 What Interest Rate Should Be Used for Public Projects?

10.7 The Benefit—Cost Ratio Method

10.8 Evaluating Independent Projects by B—C Ratios

10.9 Comparison of Mutually Exclusive Projects by B-C Ratios

10.10 Case Study—Improving a Railroad Crossing

CHAPTER 11 Breakeven and Sensitivity Analysis

11.1. Introduction

11.2 Breakeven Analysis

11.3 Sensitivity Analysis

11.4. Multiple Factor Sensitivity Analysis

CHAPTER 12 Probabilistic Risk Analysis

12.1 Intreduction

12.2 Sources of Uncertainty

12.3 The Distribution of Random Variables

12.4 Evaluation of Projects with Discrete Random Variables

12.5 Evaluation of Projects with Continuous Random Variables

12.6 Evaluation of Risk and Uncertainty by Monte Carlo Simulation

12.7 Performing Monte Carlo Simulation with a Computer

12.8 Decision Trees

12.9 Real Options Analysis

CHAPTER 13 The Capital Budgeting Process

13.1 Introduction

13.2. Debt Capital

13.3. Equity Capital

13.4 The Weighted Average Cost of Capital (WACC)

13.5 Project Selection

13.6 Postmortem Review

13.7 Budgeting of Capital Investments and Management Perspective

13.8 Leasing Decisions

13.9 Capital Allocation

CHAPTER 14 Decision Making Considering Multiattributes

14.1 Intreduction

14.2. Examples of Multiattribute Decisions

14.3. Choice of Attributes

14.4 Selection of a Measurement Scale

14.5 Dimensionality of the Problem

14.6 Noncompensatory Models

14.7. Compensatory Models

14.8 Summary

Note: The subject name Engineering Economy is slowly being replaced by Engineering Economics.

×

Table of Contents