Transcription of ENGINEERINGECONOMICANALYSIS - UNPATTI
1 IiiELEVENTHEDITIONENGINEERING ECONOMIC ANALYSISD onald G. NewnanSan Jose State UniversityTed G. EschenbachUniversity of Alaska AnchorageJerome P. LavelleNorth Carolina State UniversityNew York OxfordOXFORD UNIVERSITY PRESSO xford University Press, Inc., publishes works that further Oxford University sobjective of excellence in research, scholarship, and New YorkAuckland Cape Town Dar es Salaam Hong Kong KarachiKuala Lumpur Madrid Melbourne Mexico City NairobiNew Delhi Shanghai Taipei TorontoWith offices inArgentina Austria Brazil Chile Czech Republic France GreeceGuatemala Hungary Italy Japan Poland Portugal SingaporeSouth Korea Switzerland Thailand Turkey Ukraine VietnamFor titles covered by Section 112 of the US Higher EducationOpportunity Act, please visit for the latestinformation about pricing and alternate 2012, 2009, 2004 by Oxford University Press, by Oxford University Press, Madison Avenue, New York.
2 New York 10016 is a registered trademark of Oxford University PressAll rights reserved. No part of this publication may be reproduced,stored in a retrieval system, or transmitted, in any form or by any means,electronic, mechanical, photocopying, recording, or otherwise,without the prior permission of Oxford University of Congress Cataloging-in-Publication DataNewnan, Donald economic analysis / Donald G. Newnan, Ted G. Eschenbach,Jerome P. Lavelle. 11th bibliographical references and 978-0-19-977804-11. Engineering economy. I. Eschenbach,Ted. II. Lavelle, Jerome dc222010046035 Printingnumber:987654321 Printed in the United States of Americaon acid-free paperEugene Grant and Dick Bernhard, for leadingthe field of engineering economic analysisDNRichard Corey Eschenbach, for his lifelong exampleof engineering leadership and working well with othersTEMy lovely wife and sweet daughters,who always support all that I doJLPREFACEOur goal has been, and still is, to provide an easy-to-understand and up-to-date presenta-tion of engineering economic analysis for today s students.
3 That means the book s writingstyle must promote the reader s understanding. We humbly note that our approach has beenwell received by engineering professors and more importantly by engineering studentsthrough ten previous this BookSince it was first published in 1976, this text has become the market-leading book for theengineering economy course. It has always been characterized by A focus on practical way to encourage students to read the book,and to remember and apply what they have learned in this course, is to make thebook interesting. And there is no better way to do that than to infuse the book withreal-world examples, problems, and vignettes. meet students where they are. Most don t have any expertise inaccounting or finance. We take the time to explain concepts carefully while helpingthem apply them to engineering situations.
4 Superior instructor and student support make this course easier tounderstand, learn, and teach Oxford University Press has produced the best supportpackage available. We offer more for students and instructors than any the 11thEditionThis edition has many significant improvements in coverage. Before going chapter-by-chapter, we d like to point out a few global changes made to keep this text the most currentand most useful in today s courses: Additions to the ancillaries for students and faculty include a new set of 36 Exceltutorials, and a test bank approach to replace the Word exam file. Updates to theStudent Study Guide, Instructor s Manual, Instructor PowerPoint slides, etc., werealso done. Six new vignettes have been contributed and another six have been revised to ensurethat the set of vignettes is timely, interesting, and motivating to the students.
5 Moreethics questions are now part of theQuestions to Consider. Over 270new problems have been added and another 70 problems have been TheCases in Engineering Economy,2ndEdition which was added to theEnhanced10thEdition is still on the student CD, andeach chapter now ends with a list ofsuggested cases. Appendix B on TVM Calculators is new. It covers financial calculators and the TVMcapabilities of the HP 33s & 35s which can be used on the FE exam. Calculator solu-tions have been added to existing table-based solutions for representative examples(principally in Chapters 3 7). The approach reinforces the conceptual approach offactor based tables, but adds the computational power that is typicallyused in the realworld. If used by the instructor (and it can easily be skipped), this supports studentsspending more time on concepts and challenges in engineering economy rather thanon financial improvements to the content and wording have been made throughout the example: Nominal and effective interest has been moved from Chapter 4 to Chapter 3, sothat Chapter 3 covers single payment (PandF) cash flows, and Chapter 4 coversmultiplecash flows (A,G,andg).
6 This also supportsa better title& focus for Chapter4 (rather than the old More Interest Formulas). Chapter 4 (Equivalence forRepeated CashFlows) now emphasizes that uniformflowassumptions often correspond to the level of detail in feasibility and preliminaryanalyses, and that cash flow tables and spreadsheets are often matched to greaterlevels of detail about future cash flows. Chapter 5 (Present Worth Analysis) now includes a section on bond pricing. Chapter 10 (Uncertainty in Future Events) has a more complete discussion ofpotential problems with real option analysis. Chapter 11 (Depreciation) now covers 50% Bonus Depreciation. Chapter 12 (Income Taxes) now includes a 1-period example of leverage. Chapter 13 (Replacement Analysis) now includes a spreadsheet approach for solvingfor the challenger s economic life with any pattern of O&M costs and of salvagevalues.
7 Chapter 14 (Inflation and Price Change) includes an improved explanation of whymany problems in the text and the real world are described in constant-$ terms andsolved with a real interest rate without explicitly including inflation. Chapter 15 (Selection of a Minimum Attractive Rate of Return) on selecting theMARR now includes a more complete explanation of the weighted average costof were several significant changes made to the 10thedition and maintained in thisone that we want to highlight for faculty who are more familiar with earlier editions ofthe text. A discussion of ethics was included in Chapter 1 (Making Economic Decisions)andas part of many vignettes. An appendix of multiple choice questions intended to help students prepare for theFundamentals of Engineering Exam was added (another 24 questions added in 11thedition).
8 PREFACE xxiii Chapter 8 (Choosing the Best Alternative) was completely rewritten to use the powerof spreadsheets to graphically compare alternatives over a full range of possibleinterest rates. This is also a more intuitive foundation for incremental analysis. End-of-chapter problems were grouped under subheadings to make them easier tofind and assign. Trust Me, You ll Use This! testimonials from former engineering economy stu-dents were added between chapters 2 and Superior Newnan Support PackageThe supplement package for this text was expanded for the 9thand 10theditions, and it hasbeen updated and expanded even further for this edition. No competing text has a moreextensive support student use on the student Companion Website, the in-text CD, or packaged withthe text there are the following: A set of 36 tutorials on engineering economy applications of Excel by Julie of the University of Alabama in Huntsville.
9 A set of 54 cases for more realistic complex problems on the in-text inEngineering Economy2ndby William Peterson and Ted Eschenbach also includesthree chapters on case analysis and an example case solution as a fourth chapter. A Study Guide by Ed Wheeler of the University of tennessee , Martin (ISBN978-0-19-977819-5) is provided free with every new copy of the text. Spreadsheet problem modules, written by Thomas Lacksonen of the University ofWisconsin Stout. Interactive multiple-choice problems, written by Paul Schnitzler of the University ofSouth Florida and William Smyer of Mississippi State University. Additional Practice FE Exam problems, authored by Karen Thorsett, University instructors there is now an updated and expanded set of supplemental materials: An exam file now in test bank format edited by Meenakshi Sundaram of TennesseeTechnological University.
10 PowerPoint lecture notes for all chapters by Shih Ming Lee of Florida InternationalUniversity and David Mandeville of Oklahoma State University. An Instructor sManual by John M. Usher of Missippi State University and LawrenceSamuelson of Tri-State University and the authors, with complete solutions to allend-of-chapter problems. This is available in print. The compound interest tables from the textbookare available for adoptingprofessorswho prefer to give closed-book exams. The tables are on the website as PDF filesthat can be printed in part or in students and instructors a companion website is available with these supplements andother updates: edition maintains the approach to spreadsheets that was established in the than relying on spreadsheet templates, the emphasis is on helping students learn touse the enormous capabilities of the spreadsheet software available on nearly every com-puter.
