Table Of Content

Sixteenth Edition Abbreviations and Notation Summary CHAPTER 4 APR annualpercentagerate(nominalinterest) EOY endofyear f a geometric change from one time period to the next in cash flows ¯ orequivalentvalues i effectiveinterestrateperinterestperiod r nominalinterestrateperperiod(usuallyayear) CHAPTER 5 AW(i%) equivalent uniform annual worth, computed at i% interest, of one ormorecashflows CR(i%) equivalentannualcostofcapitalrecovery,computedati%interest CW(i%) capitalizedworth(apresentequivalent),computedati%interest FW(i%) future equivalent worth, calculated at i% interest, of one or more cashflows EUAC(i%) equivalentuniformannualcost,calculatedati%interest IRR internalrateofreturn,alsodesignatedi% MARR minimumattractiverateofreturn N lengthofthestudyperiod(usuallyyears) PW(i%) present equivalent worth, computed at i% interest, of one or more cashflows CHAPTER 6 !(B A) incremental net cash flow (difference) calculated from the cash flow − ofAlternative B minus the cash flow ofAlternative A (read: delta B minusA) CHAPTER 7 ATCF after-taxcashflow BTCF before-taxcashflow EVA economicvalueadded MACRS modifiedacceleratedcostrecoverysystem NOPAT netoperatingprofitaftertaxes WACC tax-adjustedweightedaveragecostofcapital CHAPTER 8 A$ actual(current)dollars f generalinflationrate R$ real(constant)dollars CHAPTER 9 EUAC equivalentuniformannualcost TC total(marginal)costforyeark k CHAPTER 12 E(X) meanofarandomvariable f(x) probabilitydensityfunctionofacontinuousrandomvariable p(x) probabilitymassfunctionofadiscreterandomvariable SD(X) standarddeviationofarandomvariable V(X) varianceofarandomvariable CHAPTER 13 CAPM capitalassetpricingmodel R risk-freerateofreturn F SML securitymarketline X binarydecisionvariableincapitalallocationproblems j Right now, in your course, there are young men and women whose engineering achievements could revolutionize, improve, and sustain future generations. Don’t Let Them Get Away. Engineering Economy, 16th Edition, together with MyEngineeringLab, is a complete solution for providing an engaging in-class experience that will inspire your students to stay in engineering, while also giving them the practice and scaffolding they need to keep up and be successful in the course. Learn more at myengineeringlab.com ENGINEERING ECONOMY Sixteenth Edition E E NGINEERING CONOMY SIXTEENTH EDITION WILLIAM G. SULLIVAN ELIN M. WICKS C. PATRICK KOELLING Virginia Polytechnic Institute Wicks andAssociates,L.L.P. Virginia Polytechnic Institute and State University and State University UpperSaddleRiver Boston Columbus SanFrancisco NewYork Indianapolis London Toronto Sydney Singapore Tokyo Montreal Dubai Madrid HongKong MexicoCity Munich Paris Amsterdam CapeTown VicePresidentandEditorialDirector,ECS:MarciaJ.Horton CoverDesigner:BlackHorseDesigns ExecutiveEditor:HollyStark PhotoResearcher:MartaSamsel EditorialAssistant:CarlinHeinle ImagePermissionCoordinator:KarenSanatar DirectorofOperations:NickSklitsis TextPermissionCoordinator:MichaelFarmer ExecutiveMarketingManager:TimGalligan Composition:JouveIndiaPrivateLimited MarketingAssistant:JonBryant Full-ServiceProjectManagement:PavithraJayapaul SeniorManagingEditor:ScottDisanno Printer/Binder:Courier ProductionProjectManager:GregDulles Typeface:10/12Palatino OperationsSpecialist:LindaSager Creditsandacknowledgmentsborrowedfromothersourcesandreproduced,withpermission,inthistextbookappearon appropriatepagewithintext. 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Theauthorandpublisherofthisbookhaveusedtheirbesteffortsinpreparingthisbook.Theseeffortsincludethe development,research,andtestingoftheoriesandprogramstodeterminetheireffectiveness.Theauthorandpublishermake nowarrantyofanykind,expressedorimplied,withregardtotheseprogramsorthedocumentationcontainedinthisbook. Theauthorandpublishershallnotbeliableinanyeventforincidentalorconsequentialdamageswith,orarisingoutof,the furnishing,performance,oruseoftheseprograms. PearsonEducationLtd.,London PearsonEducationNorthAsia,Ltd.,HongKong PearsonEducationSingapore,Pte.Ltd. PearsonEducacióndeMexico,S.A.deC.V. PearsonEducationCanada,Inc. PearsonEducationMalaysia,Pte.Ltd. PearsonEducation–Japan PearsonEducation,UpperSaddleRiver,NewJersey PearsonEducationAustraliaPTY,Limited LibraryofCongressCataloging-in-PublicationData Sullivan,WilliamG.,1942– Engineeringeconomy/WilliamG.Sullivan,ElinM.Wicks,C.PatrickKoelling.—Sixteenthedition. pagescm ISBN-13:978-0-13-343927-4 ISBN-10:0-13-343927-5 1. Engineeringeconomy—Textbooks. I. Wicks,ElinM. II. Koelling,C.Patrick,1953- III. Title. TA177.4.S85 2014 658.15—dc23 2013028782 10 9 8 7 6 5 4 3 2 1 ISBN-13: 978-0-13-343927-4 ISBN-10: 0-13-343927-5 CONTENTS Preface xi Green Content xviii CHAPTER1 Introduction to Engineering Economy 1 1.1 Introduction 2 1.2 ThePrinciplesofEngineeringEconomy 3 1.3 EngineeringEconomyandtheDesignProcess 7 1.4 UsingSpreadsheetsinEngineeringEconomicAnalysis 15 1.5 TryYourSkills 15 1.6 Summary 16 CHAPTER2 Cost Concepts and Design Economics 20 2.1 CostTerminology 21 2.2 TheGeneralEconomicEnvironment 27 2.3 Cost-DrivenDesignOptimization 38 2.4 PresentEconomyStudies 43 2.5 CaseStudy—TheEconomicsofDaytimeRunningLights 49 2.6 TryYourSkills 51 2.7 Summary 52 Appendix2-A AccountingFundamentals 60 CHAPTER3 Cost-Estimation Techniques 67 3.1 Introduction 68 3.2 AnIntegratedApproach 70 3.3 SelectedEstimatingTechniques(Models) 78 3.4 ParametricCostEstimating 83 3.5 CaseStudy—DemanufacturingofComputers 94 3.6 ElectronicSpreadsheetModeling:LearningCurve 96 3.7 TryYourSkills 98 3.8 Summary 100 v