Engineering Economy with MyEngineeringLab, Global Edition

Series
Pearson
Author
William G. Sullivan / Elin M. Wicks / C. Patrick Koelling  
Publisher
Pearson
Cover
Softcover
Edition
16
Language
English
Pub.-date
September 2014
ISBN13
9781292067841
ISBN
1292067845
Related Titles


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9781292067841
Engineering Economy with MyEngineeringLab, Global Edition
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Description

Engineering Economy is intended for use in undergraduate introductory courses in Engineering Economics

Used by engineering students worldwide, this best-selling text provides a sound understanding of the principles, basic concepts, and methodology of engineering economy. Built upon the rich and time-tested teaching materials of earlier editions, it is extensively revised and updated to reflect current trends and issues, with an emphasis on the economics of engineering design throughout. It provides one of the most complete and up-to-date studies of this vitally important field.

Teaching and Learning Experience

This program will provide a better teaching and learning experience–for you and your students. It will help:

  • Provide a Solid Foundation in the Principles, Concepts, and Methodology of Engineering Economy: Students will learn to understand and apply economic principles to engineering.

  • Prepare Students for Professional Practice:  Students will develop proficiency with the process for making rational decisions that they are likely to encounter in professional practice.

  • Support Learning: The TestGen testbank allows instructors to regenerate algorithmically-generated variables within each problem to offer students a virtually unlimited number of paper or online assessments.

  • Personalize Learning: MyEngineeringLab provides students with a personalized interactive learning environment, where they can learn at their own pace and measure their progress.


This package includes MyEngineeringLab, an online homework, tutorial, and assessment product designed to work with Engineering Economy to personalize learning and improve results. With a wide range of interactive, engaging, and assignable activities, students are encouraged to actively learn and retain tough course concepts.


Students, this title is available with or without MyEngineeringLab. Contact your instructor for the correct ISBNs. Instructors, contact your Pearson representative for more information.


Features

This title is a Pearson Global Edition. The Editorial team at Pearson has worked closely with educators around the world to include content which is especially relevant to students outside the United States.



Provide a Solid Foundation in the Principles, Concepts, and Methodology of Engineering Economy

  • A brief basic review of simple accounting principles is included.

  • Cost estimating is emphasized in the text.

  • Spreadsheets are integrated throughout the text. In particular, many examples include hand-worked and computer solutions (with spreadsheets) so that students can see both techniques side by side.

  • Internet-accessible electronic spreadsheets provide approximately 50 basic templates for all major topics in the text, and summarize formulas and key concepts. These give students a ready source of information for quick reference and review, eliminating the need to create basic spreadsheets, thereby saving time.

  • NEW!  Many new spreadsheet models have been added to the 16th edition (several contributed by James A. Alloway).

  • An expanded treatment of the economic aspects of engineering design is featured.

  • Economic value is explained in terms of a project's after-tax cash flows. This provides students with information regarding a new approach to measuring profitability.

  • Cost estimating, design economics, and electronic spreadsheets provide students with comprehensive, thorough coverage of essential skills and concepts behind engineering economy.

  • A multitude of examples help students to more readily understand concepts and reinforce learning.

  • Numerous exercises that involve open-ended problem statements and iterative problem-solving skills are included throughout the book.

  • UPDATED! This edition contains over 900 examples, solved problems and end-of-chapter problems. These include 70 “Try Your Skills” problems in selected chapters, with full solutions given in Appendix G.

  • NEW! Over 120 Green Engineering problems populate this edition as a subset of 750 problems at the conclusion of the 14 chapters in this book. Many of these problems incorporate energy conservation in commonly experienced situations with which students can identify.

  • UPDATED! Chapter 2, dealing with choice among alternatives when the time value of money can be ignored, has been revised for improved readability.

  • NEW! Student resources include the Pearson e-text, a complete on-line version of the book. It allows highlighting, note taking and search capabilities. This resource permits access to the Video Solutions that accompany this text as well as additional study materials.

  • UPDATED! There are more integrated videos keyed to material in the text. These video tutorials are available to students who desire extra explanation of selected examples and end-of-chapter problems in the book.


Prepare Students for Professional Practice

  • Real-world engineering economy analysis methodology helps students develop proficiency with the methodology and processes for making rational decisions in situations they are likely to encounter in professional practice.

  • Fundamentals of Engineering Exam multiple-choice questions appear at the end of each chapter to help prepare engineering students for this milestone examination, leading to professional registration.

  • Case studies with end-of-chapter questions demonstrate the integrated application of the principles, basic concepts, and methodology used by engineers in typical, real-world situations. This allows students to see how concepts are applied in the real world, while encouraging them to hone their writing and critical thinking skills.

  • The theoretical and practical aspects of selecting among capital investments are examined, teaching students to select the most profitable projects to benefit a company's bottom line.

  • Material on the cost of capital explains the cost of equity and debt capital as well as the weighted average cost of capital and its relationship to rate of return concepts. This enables students to understand how engineering projects add economic value to a company.

Support Learning

  • UPDATED! This edition features expanded TestGen software. The TestGentestbank consists of well-crafted assessment questions that are representative of problems found throughout the textbook. Professors can regenerate algorithmically-generated variables within each problem to offer students a virtually unlimited number of paper or online assessments. Additionally, instructors can view, select, and edit testbank questions or create their own questions.

  • A comprehensive instructor's manual, PowerPoint visual aids, and other classroom resources are available to adopting professors. Visit www.pearsonhighered.com/sullivan for more information.

  • UPDATED! PowerPoint visual aids for instructors have been expanded and enhanced.

This package includes MyEngineeringLab, an online homework, tutorial, and assessment product designed to work with Engineering Economy to personalize learning and improve results. With a wide range of interactive, engaging, and assignable activities, students are encouraged to actively learn and retain tough course concepts.


Personalize Learning

NEW! MyEngineeringLab for Engineering Economy provides an engaging in-class experience that will inspire your students to stay in engineering, while also giving them the practice they need to keep up and be successful in the course. It’s a complete digital solution featuring:

  • A powerful homework and test manager: MyEngineeringLab lets you create, import, and manage online homework assignments, quizzes, and tests that are automatically graded. You can choose from a wide range of assignment options, including time limits, proctoring, and maximum number of attempts allowed. The bottom line: MyEngineeringLab means less time grading and more time teaching.

  • Comprehensive online course content: Filled with a wealth of content that is tightly integrated with your textbook, MyEngineeringLab lets you easily add, remove, or modify existing instructional material. You can also add your own course materials to suit the needs of your students or department.

  • Algorithmically generated values = more opportunities to practice: MyEngineeringLab exercises are taken directly from your textbook's end-of-chapter exercises and they regenerate algorithmically to give students unlimited opportunity for practice and mastery. Instructors can assign the same exercises as homework, quizzes, or tests and know that students will be working different values.

  • Robust Gradebook tracking: The online Gradebook automatically tracks your students' results on tests, homework, and practice exercises and gives you control over managing results and calculating grades. The Gradebook provides a number of flexible grading options, including exporting grades to a spreadsheet program such as Microsoft Excel. And, it lets you measure and document your students' learning outcomes.

  • Easily scalable and shareable content: MyEngineeringLab enables you to manage multiple class sections, and lets other instructors copy your settings so a standardized syllabus can be maintained across your department. Should you want to use the same MyEngineeringLab course next semester, with the same customized settings, you can copy your existing course exactly—and even share it with other faculty members.

  • Personalized Study Plan for self-paced learning: MyEngineeringLab generates a personalized study plan for each student based on his or her test results, and the study plan links directly to interactive, tutorial exercises for topics the student hasn't yet mastered. Students can regenerate these exercises with new values for unlimited practice, and the exercises include guided solutions and multimedia learning aids to give students the extra help they need

  • Interactive tutorial exercises and multimedia learning aids: MyEngineeringLab contains tutorial tools and learning aids that give students help when they need it. Exercises provide step-by-step instruction, input-specific feedback, and hints, and may link to videos, sample problems, or the exact spot in the eText that addresses the learning objective of the problem. Questions include learning aids for extra help at point-of-use, and they offer helpful feedback when students enter incorrect answers.

  • Excel Simulations: You can assign end-of-chapter problems and quiz questions through a simulated Microsoft Excel environment that reports directly into the MyEngineeringLab grade book. With the Excel Sims, students learn and practice solving engineering problems just like they will in their future careers—without adding the extra work of hand-grading. In addition to the MyEngineeringLab Learning Aids, students also have access to Excel tutorials to provide extra Excel training.

  • Mobile Dashboard: The Mobile Dashboard gives students the feedback they need to stay on target throughout the course—right on the devices they’re already using. A companion app that is available for select MyLab & Mastering products, Mobile Dashboard provides instant, 24/7 access to course announcements, assignment due dates, scores, and results.

New to this Edition

Provide a Solid Foundation in the Principles, Concepts, and Methodology of Engineering Economy

  • Many new spreadsheet models have been added to the 16th edition (several contributed by James A. Alloway).

  • This edition contains over 900 examples, solved problems and end-of-chapter problems. These include 70 “Try Your Skills” problems in selected chapters, with full solutions given in Appendix G.

  • Over 120 Green Engineering problems populate this edition as a subset of 750 problems at the conclusion of the 14 chapters in this book. Many of these problems incorporate energy conservation in commonly experienced situations with which students can identify.

  • Chapter 2, dealing with choice among alternatives when the time value of money can be ignored, has been revised for improved readability.

  • New Student resources include the Pearson e-text, a complete on-line version of the book. It allows highlighting, note taking and search capabilities. This resource permits access to the Video Solutions that accompany this text as well as additional study materials.

  • There are more integrated videos keyed to material in the text. These video tutorials are available to students who desire extra explanation of selected examples and end-of-chapter problems in the book.


Support Learning

  • This edition features expanded TestGen software. The TestGen testbank consists of well-crafted assessment questions that are representative of problems found throughout the textbook. Professors can regenerate algorithmically-generated variables within each problem to offer students a virtually unlimited number of paper or online assessments. Additionally, instructors can view, select, and edit testbank questions or create their own questions.

  • PowerPoint visual aids for instructors have been expanded and enhanced.


This title is available with MyEngineeringLab, an online homework, tutorial, and assessment product designed to work with Engineering Economy to personalize learning and improve results. With a wide range of interactive, engaging, and assignable activities, students are encouraged to actively learn and retain tough course concepts.


Personalize Learning

NEW! MyEngineeringLab for Engineering Economy provides an engaging in-class experience that will inspire your students to stay in engineering, while also giving them the practice they need to keep up and be successful in the course. It’s a complete digital solution featuring:

  • A powerful homework and test manager: MyEngineeringLab lets you create, import, and manage online homework assignments, quizzes, and tests that are automatically graded. You can choose from a wide range of assignment options, including time limits, proctoring, and maximum number of attempts allowed. The bottom line: MyEngineeringLab means less time grading and more time teaching.

  • Comprehensive online course content: Filled with a wealth of content that is tightly integrated with your textbook, MyEngineeringLab lets you easily add, remove, or modify existing instructional material. You can also add your own course materials to suit the needs of your students or department.

  • Algorithmically generated values = more opportunities to practice: MyEngineeringLab exercises are taken directly from your textbook's end-of-chapter exercises and they regenerate algorithmically to give students unlimited opportunity for practice and mastery. Instructors can assign the same exercises as homework, quizzes, or tests and know that students will be working different values.

  • Robust Gradebook tracking: The online Gradebook automatically tracks your students' results on tests, homework, and practice exercises and gives you control over managing results and calculating grades. The Gradebook provides a number of flexible grading options, including exporting grades to a spreadsheet program such as Microsoft Excel. And, it lets you measure and document your students' learning outcomes.

  • Easily scalable and shareable content: MyEngineeringLab enables you to manage multiple class sections, and lets other instructors copy your settings so a standardized syllabus can be maintained across your department. Should you want to use the same MyEngineeringLab course next semester, with the same customized settings, you can copy your existing course exactly—and even share it with other faculty members.

  • Personalized Study Plan for self-paced learning: MyEngineeringLab generates a personalized study plan for each student based on his or her test results, and the study plan links directly to interactive, tutorial exercises for topics the student hasn't yet mastered. Students can regenerate these exercises with new values for unlimited practice, and the exercises include guided solutions and multimedia learning aids to give students the extra help they need

  • Interactive tutorial exercises and multimedia learning aids: MyEngineeringLab contains tutorial tools and learning aids that give students help when they need it. Exercises provide step-by-step instruction, input-specific feedback, and hints, and may link to videos, sample problems, or the exact spot in the eText that addresses the learning objective of the problem. Questions include learning aids for extra help at point-of-use, and they offer helpful feedback when students enter incorrect answers.

  • Excel Simulations: You can assign end-of-chapter problems and quiz questions through a simulated Microsoft Excel environment that reports directly into the MyEngineeringLab grade book. With the Excel Sims, students learn and practice solving engineering problems just like they will in their future careers—without adding the extra work of hand-grading. In addition to the MyEngineeringLab Learning Aids, students also have access to Excel tutorials to provide extra Excel training.

  • Mobile Dashboard: The Mobile Dashboard gives students the feedback they need to stay on target throughout the course—right on the devices they’re already using. A companion app that is available for select MyLab & Mastering products, Mobile Dashboard provides instant, 24/7 access to course announcements, assignment due dates, scores, and results.


Table of Contents

Preface xi

Green Content xviii

CHAPTER 1

Introduction to Engineering Economy 1

1.1 Introduction 2

1.2 The Principles of Engineering Economy 3

1.3 Engineering Economy and the Design Process 7

1.4 Using Spreadsheets in Engineering Economic Analysis 15

1.5 Try Your Skills 15

1.6 Summary 16

CHAPTER 2

Cost Concepts and Design Economics 20

2.1 Cost Terminology 21

2.2 The General Economic Environment 27

2.3 Cost-Driven Design Optimization 38

2.4 Present Economy Studies 43

2.5 Case Study–The Economics of Daytime Running Lights 49

2.6 Try Your Skills 51

2.7 Summary 52

Appendix 2-A Accounting Fundamentals 60

CHAPTER 3

Cost-Estimation Techniques 67

3.1 Introduction 68

3.2 An Integrated Approach 70

3.3 Selected Estimating Techniques (Models) 78

3.4 Parametric Cost Estimating 83

3.5 Case Study–Demanufacturing of Computers 94

3.6 Electronic Spreadsheet Modeling: Learning Curve 96

3.7 Try Your Skills 98

3.8 Summary 100

CHAPTER 4

The Time Value of Money 107

4.1 Introduction 108

4.2 Simple Interest 109

4.3 Compound Interest 110

4.4 The Concept of Equivalence 110

4.5 Notation and Cash-Flow Diagrams and Tables 113

4.6 Relating Present and Future Equivalent Values 123

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

4.8 Summary of Interest Formulas and Relationships for Discrete Compounding 133

4.9 Deferred Annuities (Uniform Series) 135

4.10 Equivalence Calculations Involving Multiple Interest Formulas 137

4.11 Uniform (Arithmetic) Gradient of Cash Flows 143

4.12 Geometric Sequences of Cash Flows 148

4.13 Interest Rates that Vary with Time 153

4.14 Nominal and Effective Interest Rates 155

4.15 Compounding More Often than Once per Year 157

4.16 Interest Formulas for Continuous Compounding and Discrete Cash Flows 160

4.17 Case Study–Understanding Economic “Equivalence” 163

4.18 Try Your Skills 166

4.19 Summary 169

CHAPTER 5

Evaluating a Single Project 186

5.1 Introduction 187

5.2 Determining the Minimum Attractive Rate of Return (MARR) 188

5.3 The PresentWorth Method 189

5.4 The Future Worth Method 196

5.5 The Annual Worth Method 197

5.6 The Internal Rate of Return Method 202

5.7 The External Rate of Return Method 213

5.8 The Payback (Payout) Period Method 215

5.9 Case Study–A Proposed Capital Investment to Improve Process Yield 218

5.10 Electronic Spreadsheet Modeling: Payback Period Method 220

5.11 Try Your Skills 222

5.12 Summary 224

Appendix 5-A The Multiple Rate of Return Problem with the IRR Method 236

CHAPTER 6

Comparison and Selection among Alternatives 240

6.1 Introduction 241

6.2 Basic Concepts for Comparing Alternatives 241

6.3 The Study (Analysis) Period 245

6.4 Useful Lives Are Equal to the Study Period 247

6.5 Useful Lives Are Unequal among the Alternatives 264

6.6 Personal Finances 277

6.7 Case Study–Ned and Larry’s Ice Cream Company 281

6.8 Postevaluation of Results 284

6.9 Project Postevaluation Spreadsheet Approach 284

6.10 Try Your Skills 287

6.11 Summary 291

CHAPTER 7

Depreciation and Income Taxes 308

7.1 Introduction 309

7.2 Depreciation Concepts and Terminology 309

7.3 The Classical (Historical) Depreciation Methods 312

7.4 The Modified Accelerated Cost Recovery System 317

7.5 A Comprehensive Depreciation Example 326

7.6 Introduction to Income Taxes 330

7.7 The Effective (Marginal) Corporate Income Tax Rate 333

7.8 Gain (Loss) on the Disposal of an Asset 336

7.9 General Procedure for Making After-Tax Economic Analyses 337

7.10 Illustration of Computations of ATCFs 341

7.11 Economic Value Added 353

7.12 Try Your Skills 355

7.13 Summary 356

CHAPTER 8

Price Changes and Exchange Rates 368

8.1 Introduction 369

8.2 Terminology and Basic Concepts 370

8.3 Fixed and Responsive Annuities 376

8.4 Differential Price Changes 381

8.5 Spreadsheet Application 383

8.6 Foreign Exchange Rates and Purchasing Power Concepts 385

8.7 Case Study–Selecting Electric Motors to Power an Assembly Line 390

8.8 Try Your Skills 393

8.9 Summary 394of Single Cash Flows 117

CHAPTER 9

Replacement Analysis 403

9.1 Introduction 404

9.2 Reasons for Replacement Analysis 404

9.3 Factors that Must Be Considered in Replacement Studies 405

9.4 Typical Replacement Problems 408

9.5 Determining the Economic Life of a New Asset (Challenger) 411

9.6 Determining the Economic Life of a Defender 415

9.7 Comparisons in Which the Defender’s Useful Life Differs from that of the Challenger 418

9.8 Retirement without Replacement (Abandonment) 421

9.9 After-Tax Replacement Studies 422

9.10 Case Study–Replacement of a Hospital’s Emergency Electrical Supply System 430

9.11 Summary 433

CHAPTER 10

Evaluating Projects with the Benefit−Cost Ratio Method 443

10.1 Introduction 444

10.2 Perspective and Terminology for Analyzing Public Projects 445

10.3 Self-Liquidating Projects 446

10.4 Multiple-Purpose Projects 446

10.5 Difficulties in Evaluating Public-Sector Projects 449

10.6 What Interest Rate Should Be Used for Public Projects? 450

10.7 The Benefit−Cost Ratio Method 452

10.8 Evaluating Independent Projects by B−C Ratios 458

10.9 Comparison of Mutually Exclusive Projects by B−C Ratios 460

10.10 Case Study–Improving a Railroad Crossing 465

10.11 Summary 467

CHAPTER 11

Breakeven and Sensitivity Analysis 475

11.1 Introduction 476

11.2 Breakeven Analysis 476

11.3 Sensitivity Analysis 483

11.4 Multiple Factor Sensitivity Analysis 489

11.5 Summary 493

CHAPTER 12

Probabilistic Risk Analysis 502

12.1 Introduction 503

12.2 Sources of Uncertainty 504

12.3 The Distribution of Random Variables 504

12.4 Evaluation of Projects with Discrete Random Variables 508

12.5 Evaluation of Projects with Continuous Random Variables 517

12.6 Evaluation of Risk and Uncertainty by Monte Carlo Simulation 522

12.7 Performing Monte Carlo Simulation with a Computer 526

12.8 Decision Trees 530

12.9 Real Options Analysis 535

12.10 Summary 538

CHAPTER 13

The Capital Budgeting Process 546

13.1 Introduction 547

13.2 Debt Capital 549

13.3 Equity Capital 550

13.4 TheWeighted Average Cost of Capital (WACC) 553

13.5 Project Selection 557

13.6 Postmortem Review 561

13.7 Budgeting of Capital Investments and Management Perspective 562

13.8 Leasing Decisions 563

13.9 Capital Allocation 565

13.10 Summary 571

CHAPTER 14

Decision Making Considering Multiattributes 575

14.1 Introduction 576

14.2 Examples of Multiattribute Decisions 576

14.3 Choice of Attributes 578

14.4 Selection of a Measurement Scale 578

14.5 Dimensionality of the Problem 579

14.6 Noncompensatory Models 579

14.7 Compensatory Models 584

14.8 Summary 592

Appendix A Using Excel to Solve Engineering Economy Problems 598

Appendix B Abbreviations and Notation 615

Appendix C Interest and Annuity Tables for Discrete Compounding 619

Appendix D Interest and Annuity Tables for Continuous Compounding 638

Appendix E Standard Normal Distribution 642

Appendix F Selected References 645

Appendix G Solutions to Try Your Skills 648

Appendix H Answers to Selected Problems 660

Index 664