Fundamentals of Engineering Economics, Global Edition

Series
Pearson
Author
Chan S. Park  
Publisher
Pearson
Cover
Softcover
Edition
4
Language
English
Total pages
736
Pub.-date
June 2019
ISBN13
9781292264790
ISBN
1292264799
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9781292264790
Fundamentals of Engineering Economics, Global Edition
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Description

For introductory engineering economics courses.

 

Relate engineering economics to students’ everyday lives for theoretical and conceptual understanding

Chan Park, author of the best-selling Contemporary Engineering Economics, tells the story of engineering economy with the more concise Fundamentals of Engineering Economics by relating concepts from class to students’ everyday lives. This book provides sound and comprehensive coverage of course concepts while addressing both the theoretical and the practical concerns of engineering economics. Written to appeal to a wide range of engineering disciplines, the text helps students build skills in making informed financial decisions and incorporates all critical decision-making tools, including the most contemporary, computer-oriented ones.

 

MyLab™ Engineering is not included.

Students, if MyLab Engineering is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN. MyLab Engineering should only be purchased when required by an instructor. Instructors, contact your Pearson representative for more information.

 

Reach every student by pairing this text with MyLab Engineering

MyLab™ is the teaching and learning platform that empowers you to reach every student. By combining trusted author content with digital tools and a flexible platform, MyLab personalizes the learning experience and improves results for each student.

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.

 

Build a thorough understanding of engineering economic theory and concepts

  • Concise yet detailed coverage of all fundamental topics of engineering economics.
    • Fundamentals is considered an alternative, more streamlined version of Contemporary Engineering Economics.
    • Chan Park's renowned authoring style tells the story of engineering economics through engaging scenarios and his hallmark student-friendly writing style.
    • A large number of end-of-chapter problems and exam-type questions varying in level of difficulty help students understand the topics.
  • Appeals to the full range of engineering disciplines including industrial, civil, mechanical, electrical, computer, aerospace, chemical, and manufacturing engineering by providing real-world examples students can relate to in their everyday lives.
    • Updated-All Chapter-opening vignettes have been updated and provide students with a real economic story describing how an individual decision maker or actual corporation has wrestled with the issues discussed in the chapter. These opening cases heighten students’ interest by pointing out the real-world relevance and applicability of what might otherwise seem to be dry technical material.
  • Satisfy the practical needs of the engineer toward making informed financial decisions
    • Expanded-Self-Test questions, formatted in a style suitable for FE Exam review, are available for each chapter and their worked out solutions are provided in Appendix A.
      • Updated-75% of the questions are new or updated.
    • Students are guided to outline the correct approach to example problems through a Given, Find, Approach, and Comments process. This guidance is intended to stimulate curiosity and to look beyond the mechanics of problem solving to explore “what-if” issues, alternative solutions methods, and the interpretation of solutions.
  • Incorporate all critical decision-making tools including computer-oriented ones
    • Emphasis on Excel’s use and productivity enhancing benefits for complex project cash flow development and analysis. All Excel spreadsheets contain easy-to-follow call-out formulas. Most chapters contain a section titled “Short Case Studies with Excel,” enabling students to use Excel to answer a set of questions.

 

 

MyLab™ Engineering is not included.

Students, if MyLab Engineering is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN. MyLab Engineering should only be purchased when required by an instructor. Instructors, contact your Pearson representative for more information.

  • Deliver trusted content: You deserve teaching materials that meet your own high standards for your course. That’s why we partner with highly respected authors to develop interactive content and course-specific resources that you can trust–and that keep your students engaged.
  • Empower each learner: Each student learns at a different pace. Personalized learning pinpoints the precise areas where each student needs practice, giving all students the support they need–when and where they need it–to be successful.
    • MyLab Engineering’s varied homework and practice questions are correlated to the textbook and many regenerate algorithmically to give students unlimited opportunity for practice and mastery. Exercises are automatically graded so students get immediate feedback on whether they’ve mastered the concept.
    • The Study Plan gives students personalized recommendations, practice opportunities, and learning aids to help them stay on track. FE Review questions are available in the Study Plan and mapped to their corresponding chapters to provide students the opportunity to prepare for the licensure exam.
  • Teach your course your way: Your course is unique. So whether you’d like to build your own assignments, teach multiple sections, or set prerequisites, MyLab gives you the flexibility to easily create your course to fit your needs.
  • Improve student results: When you teach with MyLab, student performance improves. That’s why instructors have chosen MyLab for over 15 years, touching the lives of over 50 million students.

 

New to this Edition

  • Appeals to the full range of engineering disciplines including industrial, civil, mechanical, electrical, computer, aerospace, chemical, and manufacturing engineering by providing real-world examples students can relate to in their everyday lives.
    • Updated-All Chapter-opening vignettes have been updated and provide students with a real economic story describing how an individual decision maker or actual corporation has wrestled with the issues discussed in the chapter. These opening cases heighten students’ interest by pointing out the real-world relevance and applicability of what might otherwise seem to be dry technical material.
  • Satisfy the practical needs of the engineer toward making informed financial decisions
    • Expanded-Self-Test questions, formatted in a style suitable for FE Exam review, are available for each chapter and their worked out solutions are provided in Appendix A.
      • Updated-75% of the questions are new or updated.

 

MyLab™ Engineering is not included.

Students, if MyLab Engineering is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN. MyLab Engineering should only be purchased when required by an instructor. Instructors, contact your Pearson representative for more information.

 

  • MyLab Engineering’s varied homework and practice questions are correlated to the textbook and many regenerate algorithmically to give students unlimited opportunity for practice and mastery. Exercises are automatically graded so students get immediate feedback on whether they’ve mastered the concept.
  • The Study Plan gives students personalized recommendations, practice opportunities, and learning aids to help them stay on track. FE Review questions are available in the Study Plan and mapped to their corresponding chapters to provide students the opportunity to prepare for the licensure exam.

Table of Contents

PART 1 UNDERSTANDING MONEY AND ITS MANAGEMENT
Chapter 1 Engineering Economic Decisions

1.1 The Rational Decision-Making Process
1.1.1 How Do We Make Typical Personal Decisions?
1.1.2 How Do We Approach an Engineering Design Problem?
1.1.3 What Makes Economic Decisions Different from Other Design Decisions?
1.2 The Engineer’s Role in Business
1.2.1 Making Capital-Expenditure Decisions
1.2.2 Large-Scale Engineering Economic Decisions
1.2.3 Impact of Engineering Projects on Financial Statements
1.3 Types of Strategic Engineering Economic Decisions
1.3.1 New Products or Product Expansion
1.3.2 Equipment and Process Selection
1.3.3 Cost Reduction
1.3.4 Equipment Replacement
1.3.5 Service or Quality Improvement
1.4 Fundamental Principles in Engineering Economics
Summary
Self-Test Questions
Problems

Chapter 2 Time Value of Money
2.1 Interest: The Cost of Money
2.1.1 The Time Value of Money
2.1.2 Elements of Transactions Involving Interest
2.1.3 Methods of Calculating Interest
2.2 Economic Equivalence
2.2.1 Definition and Simple Calculations
2.2.2 Equivalence Calculations Require a Common Time Basis for Comparison
2.3 Interest Formulas for Single Cash Flows
2.3.1 Compound-Amount Factor
2.3.2 Present-Worth Factor
2.3.3 Solving for Time and Interest Rates
2.4 Uneven-Payment Series
2.5 Equal-Payment Series
2.5.1 Compound-Amount Factor: Find F , Given A , i , and N
2.5.2 Sinking-Fund Factor: Find A , Given F , i , and N
2.5.3 Capital-Recovery Factor (Annuity Factor): Find A , Given P , i and N
2.5.4 Present-Worth Factor: Find P , Given A , i , and N
2.5.5 Present Value of Perpetuities
2.6 Dealing with Gradient Series
2.6.1 Handling Linear Gradient Series
2.6.2 Handling Geometric Gradient Series
2.7 More on Equivalence Calculations
Summary
Self-Test Questions
Problems

Chapter 3 Understanding Money Management
3.1 Market Interest Rates
3.1.1 Nominal Interest Rates
3.1.2 Annual Effective Interest Rates
3.2 Calculating Effective Interest Rates Based on Payment Periods
3.2.1 Discrete Compounding
3.2.2 Continuous Compounding
3.3 Equivalence Calculations with Effective Interest Rates
3.3.1 Compounding Period Equal to Payment Period
3.3.2 Compounding Occurs at a Different Rate than That at Which Payments are Made
3.4 Debt Management
3.4.1 Borrowing with Credit Cards
3.4.2 Commercial Loans—Calculating Principal and Interest Payments
3.4.3 Comparing Different Financing Options
Summary
Self-Test Questions
Problems

Chapter 4 Equivalence Calculations under Inflation
4.1 Measure of Inflation
4.1.1 Consumer Price Index
4.1.2 Producer Price Index
4.1.3 Average Inflation Rate
4.1.4 General Inflation Rate ( f ) versus Specific Inflation Rate ( fj )
4.2 Actual versus Constant Dollars
4.2.1 Conversion from Constant to Actual Dollars
4.2.2 Conversion from Actual to Constant Dollars
4.3 Equivalence Calculations under Inflation
4.3.1 Market and Inflation-Free Interest Rates
4.3.2 Constant-Dollar Analysis
4.3.3 Actual-Dollar Analysis
4.3.4 Mixed-Dollar Analysis
Summary
Self-Test Questions
Problems

PART 2 EVALUATING BUSINESS AND ENGINEERING ASSETS
Chapter 5 Present-Worth Analysis

5.1 Loan versus Project Cash Flows
5.2 Initial Project Screening Methods
5.2.1 Benefits and Flaws of Payback Screening
5.2.2 Discounted-Payback Period
5.3 Present-Worth Analysis
5.3.1 Net-Present-Worth Criterion
5.3.2 Guidelines for Selecting a MARR
5.3.3 Meaning of Net Present Worth
5.3.4 Net Future Worth and Project Balance Diagram
5.3.5 Capitalized-Equivalent Method
5.4 Methods to Compare Mutually Exclusive Alternatives
5.4.1 Doing Nothing Is a Decision Option
5.4.2 Service Projects versus Revenue Projects
5.4.3 Analysis Period Equals Project Lives
5.4.4 Analysis Period Differs from Project Lives
Summary
Self-Test Questions
Problems

Chapter 6 Annual-Equivalence Analysis
6.1 Annual-Equivalent Worth Criterion
6.1.1 Benefits of AE Analysis
6.1.2 Capital (Ownership) Costs versus Operating Costs
6.2 Applying Annual-Worth Analysis
6.2.1 Unit-Profit or Unit-Cost Calculation
6.2.2 Make-or-Buy Decision
6.3 Comparing Mutually Exclusive Projects
6.3.1 Analysis Period Equals Project Lives
6.3.2 Analysis Period Differs from Project Lives
Summary
Self-Test Questions
Problems

Chapter 7 Rate-of-Return Analysis
7.1 Rate of Return
7.1.1 Return on Investment
7.1.2 Return on Invested Capital
7.2 Methods for Finding Rate of Return
7.2.1 Simple versus Nonsimple Investments
7.2.2 Computational Methods
7.3 Internal-Rate-of-Return Criterion
7.3.1 Relationship to the PW Analysis
7.3.2 Decision Rule for Simple Investments
7.3.3 Decision Rule for Nonsimple Investments
7.4 Incremental Analysis for Comparing Mutually Exclusive Alternatives
7.4.1 Flaws in Project Ranking by IRR
7.4.2 Incremental-Investment Analysis
7.4.3 Handling Unequal Service Lives
Summary
Self-Test Questions
Problems


Chapter 8 Benefit–Cost Analysis
8.1 Evaluation of Public Projects
8.1.1 Valuation of Benefits and Costs
8.1.2 Users’ Benefits
8.1.3 Sponsor’s Costs
8.1.4 Social Discount Rate
8.2 Benefit–Cost Analysis
8.2.1 Definition of Benefit–Cost Ratio
8.2.2 Incremental B/C-Ratio Analysis
8.3 Profitability Index
8.3.1 Definition of Profitability Index
8.3.2 Incremental PI Ratio for Mutually Exclusive Alternatives
8.4 Highway Benefit–Cost Analysis
8.4.1 Define the Base Case and the Proposed Alternatives
8.4.2 Highway User Benefits
8.4.3 Sponsors’ Costs
8.4.4 Illustrating Case Example
Summary
Self-Test Questions
Problems

PART 3 DEVELOPMENT OF PROJECT CASH FLOWS
Chapter 9 Accounting for Depreciation and Income Taxes

9.1 Accounting Depreciation
9.1.1 Depreciable Property
9.1.2 Cost as Basis
9.1.3 Useful Life and Salvage Value
9.1.4 Depreciation Methods: Book and Tax Depreciation
9.2 Book Depreciation Methods
9.2.1 Straight-Line Method
9.2.2 Declining-Balance Method
9.2.3 Units-of-Production Method
9.3 Tax Depreciation Methods
9.3.1 MACRS Recovery Periods
9.3.2 MACRS Depreciation: Personal Property
9.3.3 MACRS Depreciation: Real Property
9.4 Corporate Taxes
9.4.1 How to Determine “Accounting Profit”
9.4.2 U.S. Corporate Income Tax Rates
9.4.3 Gain Taxes on Asset Disposals
Summary
Self-Test Questions
Problems

Chapter 10 Project Cash-Flow Analysis
10.1 Understanding Project Cost Elements
10.1.1 Classifying Costs for Manufacturing Environments
10.1.2 Classifying Costs for Financial Statements
10.1.3 Classifying Costs for Predicting Cost Behavior
10.2 Why Do We Need to Use Cash Flows in Economic Analysis?
10.3 Income-Tax Rate to Be Used in Project Evaluation
10.4 Incremental Cash Flows from Undertaking a Project
10.4.1 Operating Activities
10.4.2 Investing Activities
10.4.3 Financing Activities
10.5 Developing Project Cash Flow Statements
10.5.1 When Projects Require Only Operating and Investing Activities
10.5.2 When Projects Are Financed with Borrowed Funds
10.6 Effects of Inflation on Project Cash Flows
10.6.1 Depreciation Allowance under Inflation
10.6.2 Handling Multiple Inflation Rates
Summary
Self-Test Questions
Problems

Chapter 11 Handling Project Uncertainty
11.1 Origins of Project Risk
11.2 Methods of Describing Project Risk
11.2.1 Sensitivity Analysis
11.2.2 Sensitivity Analysis for Mutually Exclusive Alternatives
11.2.3 Break-Even Analysis
11.2.4 Scenario Analysis
11.3 Probabilistic Cash Flow Analysis
11.3.1 Including Risk in Investment Evaluation
11.3.2 Aggregating Risk over Time
11.3.3 Estimating Risky Cash Flows
11.4 Considering the Project Risk by Discount Rate
11.4.1 Determining the Company Cost of Capital
11.4.2 Project Cost of Capital: Risk-Adjusted Discount Rate Approach
Summary
Self-Test Questions
Problems

PART 4 SPECIAL TOPICS IN ENGINEERING ECONOMIC
Chapter 12 Replacement Decisions

12.1 Replacement-Analysis Fundamentals
12.1.1 Basic Concepts and Terminology
12.1.2 Approaches for Comparing Defender and Challenger
12.2 Economic Service Life
12.3 Replacement Analysis when the Required Service Period is Long
12.3.1 Required Assumptions and Decision Frameworks
12.3.2 Handling Unequal Service Life Problems in Replacement Analysis
12.3.3 Replacement Strategies under the Infinite Planning Horizon
12.4 Replacement Analysis with Tax Considerations
Summary
Self-Test Questions
Problems

Chapter 13 Understanding Financial Statements
13.1 Accounting: The Basis of Decision Making
13.2 Financial Status for Businesses
13.2.1 The Balance Sheet
13.2.2 The Income Statement
13.2.3 The Cash-Flow Statement
13.3 Using Ratios to Make Business Decisions
13.3.1 Debt Management Analysis
13.3.2 Liquidity Analysis
13.3.3 Asset Management Analysis
13.3.4 Profitability Analysis
13.3.5 Market-Value Analysis
13.3.6 Limitations of Financial Ratios in Business Decisions
13.3.7 Where We Get the Most Up-to-Date Financial Information
13.4 Principle of Investing in Financial Assets
13.4.1 Trade-Off between Risk and Reward
13.4.2 Broader Diversification Reduces Risk
13.4.3 Broader Diversification Increases Expected Return
Summary
Self-Test Questions
Problems

Appendix A Self-Test Questions with Answers
Appendix B Interest Factors for Discrete Compounding
Appendix C How to Read the Cumulative Standardized Normal Distribution Function

Appendix D Summary of Essential Interest Formulas, Decision Rules, and Excel Functions