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Engineering Economy

Book Description

Engineering Economy is meant as an introductory course for undergraduate students, and it explains and demonstrates the principles and techniques of engineering economic analysis as applied in different fields of engineering.

Table of Contents

  1. Cover
  2. Title Page
  3. Contents
  4. About the Authors
  5. Foreword
  6. Preface
  7. 1 - Engineering Economy: A Prologue
    1. 1.1 - Consumer and Producer Goods and Services
    2. 1.2 - Necessities, Luxuries, and Relation between Price and Demand
    3. 1.3 - Competition or Market Structure
    4. 1.4 - Relation between Total Revenue and Demand
    5. 1.5 - Cost Concepts
    6. 1.6 - Relationship between Cost and Volume
    7. 1.7 - The Law of Supply and Demand
    8. 1.8 - The Law of Diminishing Marginal Returns
  8. 2 - Fundamentals of Mathematics and Engineering Economics
    1. 2.1 - Introduction
    2. 2.2 - Theory of Consumer Behaviour
      1. 2.2.1 - Meaning of Utility
      2. 2.2.2 - Meaning of Demand
    3. 2.3 - Concepts of Elasticity
      1. 2.3.1 - Own Price Elasticity
      2. 2.3.2 - Determinants of Price Elasticity
      3. 2.3.3 - Income Elasticity of Demand
      4. 2.3.4 - Cross-price Elasticity of Demand
      5. 2.3.5 - Engel Curve and Income Elasticity
      6. 2.3.6 - Relationship between Price Elasticity and Marginal Revenue
    4. 2.4 - Laws of Diminishing Marginal Utility
    5. 2.5 - Principle of Equimarginal Utility
    6. 2.6 - Indifference Curves (ICs) Theory/Ordinal Utility Theory
      1. 2.6.1 - Indifference Curves
      2. 2.6.2 - Nature of Consumer Preferences
      3. 2.6.3 - Indifference Map
    7. 2.7 - Rate of Commodity Substitution
      1. 2.7.1 - Properties of ICs
      2. 2.7.2 - Budget Line
      3. 2.7.3 - Consumer's Equilibrium/Maximization of Utility
      4. 2.7.4 - Alternative Method of Utility Maximization
    8. 2.8 - Application and Uses of ICs
      1. 2.8.1 - Income and Leisure Choice
      2. 2.8.2 - Revealed Preference Hypothesis
      3. 2.8.3 - Consumer's Surplus
  9. 3 - Elementary Economic Analysis
    1. 3.1 - Theory of the Firm
    2. 3.2 - Law of Supply
      1. 3.2.1 - Concepts of Elasticity of Supply
    3. 3.3 - Meaning of Production
      1. 3.3.1 - Production Function and Its Types
      2. 3.3.2 - General Production Function
      3. 3.3.3 - Cobb-Douglas Production Function
      4. 3.3.4 - CES Production Function
      5. 3.3.5 - Producer's Equilibrium
    4. 3.4 - Concept of Isoquants
    5. 3.5 - Marginal Rate of Technical Substitution
    6. 3.6 - The Elasticity of Substitution
    7. 3.7 - Iso-cost Line
    8. 3.8 - Producer's Surplus
    9. 3.9 - Cost Minimization
      1. 3.9.1 - Cost Function for the Cobb-Douglas Technology
      2. 3.9.2 - The Cost Function for the CES Technology
      3. 3.9.3 - The Cost Function for the Leontief Technology
      4. 3.9.4 - The Cost Function for the Linear Technology
    10. 3.10 - Returns to Scale and Returns to Factor
    11. 3.11 - Cost Theory and Estimation
      1. 3.11.1 - Concept of Costs and Its Types
    12. 3.12 - Profits
      1. 3.12.1 - Normal Profits
      2. 3.12.2 - Economic Profits
      3. 3.12.3 - Profit Maximization
    13. 3.13 - Market Structure and Degree of Competition
      1. 3.13.1 - Perfect Competition
      2. 3.13.2 - Monopoly
      3. 3.13.3 - Monopolistic Competition
      4. 3.13.4 - Oligopoly Models
  10. 4 - Interest Formulae and their Applications
    1. 4.1 - Introduction
    2. 4.2 - Why Return to Capital is Considered?
    3. 4.3 - Interest, Interest Rate and Rate of Return
    4. 4.4 - Simple Interest
    5. 4.5 - Compound Interest
    6. 4.6 - The Concept of Equivalence
    7. 4.7 - Cash Flow Diagrams
    8. 4.8 - Terminology and Notations/Symbols
    9. 4.9 - Interest Formula for Discrete Cash Flow and Discrete Compounding
      1. 4.9.1 - Interest Formulae Relating Present and Future Equivalent Values of Single Cash Flows
      2. 4.9.2 - Interest Formulae Relating a Uniform Series (Annuity) to Its Present and Future Worth
    10. 4.10 - Interest Formulae Relating an Arithmetic Gradient Series to Its Present and Annual Worths
      1. 4.10.1 - Finding P when Given G
      2. 4.10.2 - Finding A when Given G
    11. 4.11 - Interest Formulae Relating a Geometric Gradient Series to Its Present and Annual Worth
    12. 4.12 - Uniform Series with Beginning-of-Period Cash Flows
    13. 4.13 - Deferred Annuities or Shifted Uniform Series
    14. 4.14 - Calculations Involving Uniform Series and Randomly Placed Single Amounts
    15. 4.15 - Calculations of Equivalent Present Worth and Equivalent Annual Worth for Shifted Gradients
    16. 4.16 - Calculations of Equivalent Present Worth and Equivalent Annual Worth for Shifted Decreasing Arithmetic Gradients
    17. 4.17 - Nominal and Effective Interest Rates
    18. 4.18 - Interest Problems with Compounding More Often than Once per Year
      1. 4.18.1 - Single Amounts
      2. 4.18.2 - Uniform Series and Gradient Series
      3. 4.18.3 - Interest Problems with Uniform Cash Flows Less Often than Compounding Periods
      4. 4.18.4 - Interest Problems with Uniform Cash Flows More Often than Compounding Periods
  11. 5 - Methods for Making Economy Studies
    1. 5.1 - Introduction
    2. 5.2 - Basic Methods
    3. 5.3 - Present Worth (P.W.) Method
    4. 5.4 - Future Worth (F.W.) Method
    5. 5.5 - Annual Worth (A.W.) Method
    6. 5.6 - Internal Rate of Return (I.R.R.) Method
    7. 5.7 - External Rate of Return (E.R.R. ) Method
    8. 5.8 - Explicit Reinvestment Rate of Return (E.R.R.R.) Method
    9. 5.9 - Capitalized Cost Calculation and Analysis
    10. 5.10 - Payback (Payout) Method
  12. 6 - Selection Among Alternatives
    1. 6.1 - Introduction
    2. 6.2 - Alternatives Having Identical Disbursements and Lives
    3. 6.3 - Alternatives Having Identical Revenues and Different Lives
      1. 6.3.1 - Comparisons Using the Repeatability Assumption
      2. 6.3.2 - Comparisons Using the Coterminated Assumption
    4. 6.4 - Alternatives Having Different Revenues and Identical Lives
    5. 6.5 - Alternatives Having Different Revenues and Different Lives
    6. 6.6 - Comparison of Alternatives by the Capitalized Worth Method
    7. 6.7 - Selection among Independent Alternatives
  13. 7 - Replacement and Retention Decisions
    1. 7.1 - Introduction
    2. 7.2 - Reasons for Replacement
    3. 7.3 - Terminologies Used in Replacement Study
    4. 7.4 - Economic Service Life
    5. 7.5 - Procedure for Performing Replacement Study
    6. 7.6 - Replacement Study Over a Specified Study Period
  14. 8 - Depreciation
    1. 8.1 - Introduction
    2. 8.2 - Depreciation Terminology
    3. 8.3 - Methods of Depreciation
      1. 8.3.1 - The Straight Line (SL) Method
      2. 8.3.2 - The Declining Balance (DB) Method
      3. 8.3.3 - Sum-of-the-Years'-Digits (SYD) Method
      4. 8.3.4 - The Sinking Fund Method
      5. 8.3.5 - The Service Output Method
  15. 9 - Economic Evaluation of Public Sector Projects
    1. 9.1 - Public Sector Projects
    2. 9.2 - Benefit/Cost Analysis of a Single Project
    3. 9.3 - Selection between Two Mutually Exclusive Alternatives Using Incremental B/C Analysis
    4. 9.4 - Selection among Multiple Mutually Exclusive Alternatives Using Incremental B/C Analysis
  16. 10 - Economy Study with Inflation Considered
    1. 10.1 - Introduction
    2. 10.2 - Effects of Inflation
    3. 10.3 - Present Worth Calculations Adjusted for Inflation
    4. 10.4 - Future Worth Calculations Adjusted for Inflation
    5. 10.5 - Capital Recovery Calculations Adjusted for Inflation
  17. 11 - Make or Buy Decision
    1. 11.1 - Introduction
    2. 11.2 - Feasible Alternatives for Launching New Products
    3. 11.3 - Decisive Factors for Make or Buy Decision
      1. 11.3.1 - Criteria for Make Decision
      2. 11.3.2 - Criteria for Buy Decision
    4. 11.4 - Techniques Used to Arrive at Make or Buy Decision
      1. 11.4.1 - Simple Cost Analysis
      2. 11.4.2 - Economic Analysis
      3. 11.4.3 - Break-Even Analysis
  18. 12 - Project Management
    1. 12.1 - Introduction
    2. 12.2 - Phases of Project Management
      1. 12.2.1 - Planning
      2. 12.2.2 - Scheduling
      3. 12.2.3 - Monitoring and Control
    3. 12.3 - Bar or Gantt Charts
    4. 12.4 - Network Analysis Technique
    5. 12.5 - Critical Path Method (CPM)
      1. 12.5.1 - Arrow Diagrams
      2. 12.5.2 - Activity Description
      3. 12.5.3 - Understanding Logic of Arrow Diagrams
      4. 12.5.4 - Dummy Activities
    6. 12.6 - Guidelines for Drawing Network Diagrams or Arrow Diagrams
    7. 12.7 - CPM Calculations
      1. 12.7.1 - Critical Path
      2. 12.7.2 - Critical Activities
      3. 12.7.3 - Non-critical Activities
      4. 12.7.4 - Earliest Event Time
      5. 12.7.5 - Latest Event Time
    8. 12.8 - Calculation of the Earliest Occurrence Time of Events
    9. 12.9 - Calculation of the Latest Occurrence Time of Events
    10. 12.10 - Activity Times
      1. 12.10.1 - Earliest Start Time
      2. 12.10.2 - Earliest Finish Time
      3. 12.10.3 - Latest Finish Time
      4. 12.10.4 - Latest Start Time
    11. 12.11 - Float
      1. 12.11.1 - Types of Float
      2. 12.11.2 - Negative Float
    12. 12.12 - Identification of Critical Path
    13. 12.13 - Programme Evaluation and Review Technique (PERT)
      1. 12.13.1 - PERT Activity Time Estimates
      2. 12.13.2 - PERT Computations
      3. 12.13.3 - Computation of Probabilities of Completion by a Specified Date
    14. 12.14 - Project Crashing
      1. 12.14.1 - Cost Slope
      2. 12.14.2 - Cost of Crashing
  19. 13 - Value Engineering
    1. 13.1 - What is Value Engineering or Value Analysis?
      1. 13.1.1 - Definition of VE or VA
      2. 13.1.2 - Defining Cost and Value
    2. 13.2 - Nature and Measurement of Value
    3. 13.3 - How is a VE or VA Study Conducted?
    4. 13.4 - The VE or VA Process
    5. 13.5 - Types of VE or VA
    6. 13.6 - How to Use VE or VA
      1. 13.6.1 - Keys to Success
      2. 13.6.2 - Origination Phase
      3. 13.6.3 - Information Phase
      4. 13.6.4 - Innovation Phase
      5. 13.6.5 - Evaluation Phase
      6. 13.6.6 - Implementation Phase
    7. 13.7 - Summary
  20. 14 - Forecasting
    1. 14.1 - Introduction
    2. 14.2 - Basic Categories of Forecasting
    3. 14.3 - Extrapolative Methods
      1. 14.3.1 - Components of Demand
      2. 14.3.2 - Moving Average Method
      3. 14.3.3 - Weighted Moving Average Method
      4. 14.3.4 - Exponential Smoothing Methods
    4. 14.4 - Causal or Explanatory Methods
      1. 14.4.1 - Regression Analysis
      2. 14.4.2 - Simple Regression Analysis
    5. 14.5 - Qualitative or Judgmental Methods
      1. 14.5.1 - Build up Method
      2. 14.5.2 - Survey Method
      3. 14.5.3 - Test Markets
      4. 14.5.4 - Panel of Experts
    6. 14.6 - Forecast Errors
  21. Appendix A
  22. Appendix B
  23. Appendix C
  24. Bibliography
  25. Copyright