Fundamentals of engineering economics chan s park pdf download

Page 84 2. Page 88 2. Page 92 Example of an Interest Transaction Page 93 Cash Flow Diagrams Page 95 End-of-Period Convention Page 97 Compound Interest Page 98 2. Page 2. Page Interest Tables Page Factor Notation Page Summary Page Self-Test Questions Page Problems Page 3. Page Borrowing with Credit Cards Page Commercial Loans Page Comparing Different Financing Options Page Short Case Studies with Excel Page 4. Page 5. Page Investment-Pool Concept Page Borrowed-Funds Concept Page Perpetual Service Life Page Revenue Projects Page Owning and Operating a Dump Truck Page 6.

Page Capital Ownership Costs Page Equivalent Annual Operating Costs Page Is College Worth It? Page 7. Page Direct-Solution Method Page Trial-and-Error Method Page Rate-of-Return Calculation with Excel Page Modified Internal Rate of Return Page Return on Invested Capital Page 7A-1 Net-Investment Test Page Robot Cargo Handling at Port Page 8.

Page 9. Page Depreciation Rate Page Switching Policy Page Calculation of Net Income Corporate Income Tax System Page Corporate Tax Rates Page Book Value Calculation Page Taxable Gains or Losses Page Depreciation Concept Page Cost Basis Page Book Depreciation Methods Page Units-of-Production Method Page Tax Depreciation Page Gains or Losses Page California Valley Solar Ranch project Page Manufacturing Costs Page Page Period Costs Page Cost Flows in a Manufacturing Company Page Fixed and Variable Costs Page Break-Even Sales Volume Page Cost of Equity Capital Page Cost of Debt Capital Page Calculating the Company Cost of Capital Page Chapter Twelve Replacement Decisions Page As Milorganite factory ages, repair costs mount Page Current Market Value Page Sunk Costs Page Operating Costs Page Cash-Flow Approach Page Opportunity-Cost Approach Page Planning Horizon Study Period Page Relevant Cash-Flow Information Page Assets Page Net Income Page Dividends and Retained Earnings Page Sources and Uses of Cash Page Reporting Format Page Debt Ratio Page Quick Acid Test Ratio Page Return on Total Assets Page Return on Common Equity Page Book Value per Share Page Chapter Page Index Page A Page B Page C Page D Page E Page F Page G Page H Page I Page K Page L Page M Page N Page O Page P Page Q Page R Page S Page T Page U Page V Page W Page Y By combining trusted author content with digital tools and a flexible platform, MyLab Engineering personalizes the learning experience and improves results for each student.

Study Plan The Study Plan gives students personalized recommendations, practice opportunities, and learning aids to help them stay on track.

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Description: Fourth edition. Pearson Education, Inc. Includes index. P DDC Engineering economics is one of the most practical subject matters in the engineering curriculum, but it is an always challenging, ever-changing discipline.

Contemporary Engineering Economics CEE , now in its sixth edition, was first published in , and since then, we have tried to reflect changes in the business world in each new edition along with the latest innovations in education and publishing.

These changes have resulted in a better, more complete textbook, but one that is much longer than it was originally intended. This may present a problem: Today, covering the textbook in a single term is increasingly difficult. Therefore, we decided to create Fundamentals of Engineering Economics FEE for those who like contemporary but think a smaller, more concise textbook would better serve their needs.

Goals of the Text This text aims not only to provide sound and comprehensive coverage of the concepts of engineering economics but also to address the practical concerns of engineering economics. More specifically, this text has the following goals: 1. To build a thorough understanding of the theoretical and conceptual basis upon which the practice of financial project analysis is built.

To satisfy the very practical needs of the engineer toward making informed financial decisions when acting as a team member or project manager for an engineering project. To incorporate all critical decision-making tools—including the most contemporary, computer-oriented ones that engineers bring to the task of making informed financial decisions.

To appeal to the full range of engineering disciplines for which this course is often required: industrial, civil, mechanical, electrical, computer, aerospace, chemical, and manufacturing engineering as well as engineering technology.

Intended Market and Use This text is intended for use in introductory engineering economics courses. Unlike the larger textbook CEE , it is possible to cover FEE in a single term and perhaps even to supplement it with a few outside readings or case studies. Although the chapters in FEE are arranged logically, they are written in a flexible, modular format, allowing instructors to cover the material in a different sequence. New to This Edition Much of the content has been streamlined to provide materials in depth and to reflect the challenges in contemporary engineering economics.

Some of the highlighted changes are as follows: All chapter opening vignettes—a trademark of Fundamentals of Engineering Economics—have been completely replaced with more current and thought-provoking examples from both service and manufacturing sectors.

These questions are formatted in a style suitable for Fundamentals Engineering Exam review and were created to help students prepare for a typical class exam common to introductory engineering economic courses.

Most of the end-of-chapter problems are revised to reflect the changes in the main text. In Chapter 2 , updated the tuition prepayment plan and lottery examples. In Chapter 3 , introduced a new example to compare two different financial products. In Chapter 4 , updated all consumer price index CPI and inflation related data, restructured many examples to facilitate the understanding of equivalence calculation under inflation.

In Chapter 6 , expanded an example of life-cycle cost analysis for an electric motor selection problem. In Chapter 7 , added a new section on modified internal rate of return. In Chapter 8 , added a new benefit—cost analysis example of comparison of mutually exclusive public projects. In Chapter 10 analysis.

In Appendix A , updated all solutions to be consistent with new set of self-test questions. Although we pruned some material and clarified, updated, and otherwise improved all of the chapters, FEE should still be considered an alternative and streamlined version of CEE.

We did retain all of the pedagogical elements and supporting materials that helped make CEE so successful. For example: Each chapter opens with a real economic vignette describing how an individual decision maker or actual corporation has wrestled with the issues discussed in the chapter. In working out each individual chapters example problems, students are encouraged to highlight the critical data provided by each question, isolate the question being asked, and outline the correct approach in the solution under the headings Given, Find, Approach, and Comments, respectively.

This convention is employed throughout the text. These problems reinforce the concepts covered in the chapter and provide students an opportunity to become more proficient with the use of an electronic spreadsheet. Many of Excel spreadsheets now contain easy-to-follow call-out formulas.

The integration of Excel is another important feature of FEE. Students have increased access to and familiarity with Excel, and instructors have more inclination either to treat these topics explicitly in the course or to encourage students to experiment independently.

One could argue that the use of Excel will undermine true understanding of course concepts. This text does not promote the trivial or mindless use of Excel as a replacement for genuine understanding of and skill in applying traditional solution methods.

To Student: How to Prepare for the Fundamentals of Engineering FE Exam The set of self-study questions at the end of each chapter is designed primarily to help you develop a working knowledge of the concepts and principles of engineering economics. However, the questions are also perfect resource to help you prepare the Fundamentals of Engineering FE exam.

All questions are structured in multiple-choice format because these types of exam questions are used in the FE exam and, increasingly, in introductory engineering economics courses. The FE exam typically consists of multiple-choice questions. During the morning session questions , all examinees take a general exam common to all disciplines. During the afternoon session 60 questions , examinees can opt to take a general exam or a discipline-specific Chemical, Civil, Electrical, Environmental, Industrial, or Mechanical exam.

The general exam includes four questions related to engineering economics in the morning session and five in the afternoon session. The specific engineering economics topics covered in the FE exam are Discounted cash flow e. Study Plan: The Study Plan gives students personalized recommendations, practice opportunities, and learning aids to help them stay on track.

Deliver Trusted Content: You deserve teaching and learning materials that meet your own high standards for your course. Acknowledgments This book reflects the efforts of a great many individuals over a number of years. First of all, I wish to thank the many users of the book faculty, students, and practitioners who offered useful suggestions regarding the book over the years.

In particular, I would like to recognize the following individuals whose reviews and comments for the previous editions have contributed to this edition. Once again, I would like to thank each of them: Roland K. John L. Chan S. Corporate Income Tax System 9. Travis Kalanick, the founder of Uber, was born in Los Angeles, California, in ; he learned to code at an early age and went on to study computer engineering at UCLA but left with a few months to go before graduation.

After a couple of startups, he had the financial means and time to create Uber. On launching, Uber entered into direct competition with the traditional taxi industry, which was highly fragmented globally. Licenses to operate taxis were generally tightly controlled by local authorities and regulatory bodies; new or additional licenses were not readily granted and no consideration was given to evolving population figures. Existing operators were therefore heavily protected, allowing fares to climb in the absence of free competition.

To do so, it developed a proprietary system and mechanism for managing the volume and flow of vehicles. Essentially, the algorithm tries to predict urban traffic flows based on the existing data and therefore be as accurate as possible in determining where and when customers would need a car. By December , Uber had operations in over cities across the U. Another innovation is the introduction of UberPool; this service allows riders heading the same way to share an Uber and save on cost.

Kalanick believes that UberPool has the potential to be as affordable as taking a subway, or a bus, or other means of transportation.

It took Uber only five and a half years to surpass the valuation of year-old General Motors. Does Uber really deserve a higher valuation than the companies that manufacture and sell the bulk of cars around the worlds? That remains to be seen. Companies like Snap, Facebook, Google, Dell, and Microsoft produce computer-related products and have market values of ten to hundred billion dollars. These companies were all founded by highly motivated young college students just like Mr.

Also common among these successful businesses is their capable and imaginative engineers who constantly generate sound ideas for capital investment, execute them well, and obtain good results. You might wonder what role these engineers play in making such business decisions: What specific tasks are assigned to these engineers, and what tools and techniques are available to them for making such capital-investment decisions?

In this book, we will consider many investment situations, personal as well as business. Most are made automatically without realizing that we are actually following some sort of logical decision flowchart. Rational decision making is often a complex process that includes a number of essential elements. This chapter will provide examples of how two engineering students approached their financial and engineering design problems using flexible, rational decision making.

By reviewing these examples, we will be able to identify some essential elements common to any rational decision-making process. The first example illustrates how a student named Maria Clark narrowed down her choice between two competing alternatives when financing an automobile.

The second example illustrates how a typical engineering design class project idea evolves and how a student named Sonya approached the design problem by following a logical method of analysis. For Maria Clark, a senior at the University of Washington, the future holds a new car.

Her Kia Sportage has clocked almost , miles, and she wants to replace it soon. But how to do it—should she buy or lease? On the other hand, she would be limited to driving only a specified number of miles, about 12, per year, after which she would have to pay 20 cents or more per mile. Maria is well aware that choosing the right vehicle and the best possible financing are important decisions.

Yet, at this point, Maria is unsure of the implications of buying versus leasing. Of the cars that were within her budget, the Chevy Sonic appeared to be attractive in terms of style, price, and options. After having very satisfactory driving experiences, Maria thought that it would be prudent to thoroughly examine the many technical and safety features of the vehicle.

After her examination, she concluded that Sonic model would meet her expectation in terms of reliability, safety features, and quality. This amount would be just enough to make any down payment required for buying or leasing the new automobile. Since Maria is also considering the option of buying the car, it is even more challenging to determine precisely whether she would be better off buying than leasing.

To make a comparison of leasing versus buying, Maria could have considered what she likely would pay for the same vehicle under both scenarios. If she would own the car for as long as she would lease it, she could sell the car and use the proceeds to pay off any outstanding loan. If finances were her only consideration, her choice would depend on the specifics of the deal.

But beyond finances, she would need to consider the positives and negatives of her personal preferences. By leasing, she would never experience the joy of the final payment—but she would have a new car every three years. Through her research, Maria learned that there are two types of leases: open-end and closed-end.

The most popular by far was closed-end because open-end leases potentially expose the consumer to higher payments at the end of the lease if the car depreciates faster than expected. To get the best financial deal, Maria obtained some financial facts from the dealer on their best offers.

With each offer, she added up all the costs of each option due at signing. This sum does not reflect the total cost of either leasing or buying that vehicle over 39 months, as counting routine items such as oil changes and other maintenance are not considered. See Table 1. Disposition fee is a paperwork charge for getting the vehicle ready for resale after the lease ends.

The monthly payment for buying option is based on 2. Table 1. However, if she were to drive any additional miles over the limit, her savings would be reduced by 25 cents for each additional mile driven. Maria would need to drive 14, extra miles over the limit in order to lose all the savings. We need to carefully consider all of the pro, cons, and costs involved and determine which best fits the individual situation. In no way are we saying what Maria did was a logical way to reach the sound economic decision.

Even in many situations, the decision could be favoring the buy option. Now let us revisit the decision-making process in a more structured way. The analysis can be thought of as including the six steps summarized in Figure 1.

These six steps are known as the rational decision-making process. Certainly, we do not follow all six steps in every decision problem. Some decision problems may not require much time and effort.

Quite often, we base our decisions solely on emotional reasons. Figure 1. The idea of design and development is what most distinguishes engineering from science, the latter being concerned principally with understanding the world as it is. As design and manufacturing processes become more complex, the engineer will increasingly be called upon to make decisions that involve cost.

As of this writing, several versions of self-chilling beverage can appeared on the market. Getting an Idea: Necessity Is the Mother of Invention Throughout history, necessity has proven to be the mother of invention. Most people abhor lukewarm beverages, especially during the hot days of summer. So, several years ago, Sonya Talton, an electrical engineering student at Johns Hopkins University, had a revolutionary idea—a self-chilling soda can!

Picture this: It is one of those sweltering, muggy August afternoons. Your friends have finally gotten their acts together for a picnic at the lake. Together, you pull out the items you brought with you: blankets, sunscreen, sandwiches, chips, and soda. Great start!

And, of course, no one wants to go back to the store for more ice! Why does someone not come up with a soda container that can chill itself? Setting Design Goals and Objectives Sonya decided to devise a self chilling soda can as the term project in her engineering graphics and design course.

The professor stressed innovative thinking and urged students to consider practical, but novel, concepts. The first thing Sonya needed to do was to establish some goals for the project: Get the soda as cold as possible in the shortest possible time. Keep the container design simple. Keep the size and weight of the newly designed container similar to that of the traditional soda can.

This factor would allow beverage companies to use existing vending machines and storage equipment. Keep the production costs low. Make the product environmentally safe. Evaluating Design Alternatives With these goals in mind, Sonya had to think of a practical, yet innovative, way of chilling the can.

Ice was the obvious choice—practical, but not innovative. Sonya had a great idea: What about a chemical ice pack? Sonya asked herself what would go inside such an ice pack. The answer she came up with was ammonium nitrate NH4NO3 and a water pouch. When pressure is applied to the chemical ice pack, the water pouch breaks and mixes with the NH4NO3, creating an endothermic reaction the absorption of heat.

How much water should go in the water pouch? Next, she needed to determine how cold a refrigerated soda gets as a basis for comparison. But was it economically marketable?

To determine the marketability of her self-chilling soda can, Sonya surveyed approximately 80 people. She asked them only two questions: 1 How old were they? The under group was willing to pay the most, 84 cents, on average. The 40plus bunch wanted to pay only 68 cents, on average. Overall, members of the entire surveyed group would be willing to spend 75 cents for a self-chilling soda can. This poll was hardly a scientific market survey, but it did give Sonya a feel for what would be a reasonable price for her product.

The next hurdle was to determine the existing production cost of one traditional can of soda. Also, how much more would it cost to produce the selfchiller? Would it be profitable? She went to the library, and there she found the bulk cost of the chemicals and materials she would need. Then she calculated how much money would be required for production of one unit of soda. She could not believe it!

It would cost only 12 cents to manufacture and transport one can of soda. The self-chiller would cost 2 or 3 cents more. That was not bad, considering that the average consumer was willing to pay up to 25 cents more for the self-chilling can than for the traditional one that typically costs 50 cents. Considering Green Engineering The only two constraints left to consider were possible chemical contamination of the soda and recyclability.

Theoretically, it should be possible to build a machine that would drain the solution from the can and recrystallize it. The ammonium nitrate could then be reused in future soda cans; in addition, the plastic outer can could be recycled. Chemical contamination of the soda, however, was a big concern. Unfortunately, there was absolutely no way to ensure that the chemical and the soda would never come in contact with one another inside the cans.

To ease consumer fears, Sonya decided that a color or odor indicator could be added to alert the consumer to contamination if it occurred. What Is the Next Step? The self-chilling beverage container can would be a wonderful technological advancement.

The product would be convenient for the beach, picnics, sporting events, and barbecues. Its design would incorporate consumer convenience while addressing environmental concerns. It would be innovative, yet inexpensive, and it would have an economic as well as a social impact on society. Sonya would explore the possibility of patent application of her idea.

Economic decisions are fundamentally different from the types of decisions typically encountered in engineering design. In a design situation, the engineer uses known physical properties, the principles of chemistry and physics, engineering design correlations, and engineering judgment to arrive at a workable and optimal design.

If the judgment is sound, the calculations are done correctly, and we ignore potential technological advances, the design is time invariant. In considering economic decisions, the measurement of investment attractiveness, which is the subject of this book, is relatively straightforward.

However, information required in such evaluations always involves predicting, or forecasting, product sales, product selling price, and various costs over some future time frame—5 years, 10 years, even 25 years.

All such forecasts have two things in common. First, they are never completely accurate when compared with the actual values realized at future times. Second, a prediction or forecast made today is likely to be different than one made at some point in the future.

It is this ever-changing view of the future that can make it necessary to revisit and even alter previous economic decisions. Thus, unlike engineering design outcomes, the conclusions reached through economic evaluation are not necessarily time invariant.

Economic decisions have to be based on the best information available at the time of the decision and a thorough understanding of the uncertainties in the forecasted data. Engineers are called upon to participate in a variety of decision-making processes ranging from manufacturing and marketing to finances. We will restrict our focus here to various economic decisions related to engineering projects.

We refer to these decisions as engineering economic decisions. Engineers must consider the effective use of fixed capital assets such as buildings and machinery. With the purchase of any fixed asset—equipment, for example—we need to estimate the profits more precisely, the cash flows that the asset will generate during its service period. In other words, we have to make capitalexpenditure decisions based on predictions about the future.

Suppose, for example, that you are considering the purchase of a deburring machine to meet the anticipated demand for hubs and sleeves used in the production of gear couplings. You expect the machine to last 10 years. This purchase decision thus involves an implicit year sales forecast for the gear couplings, which means that a long waiting period will be required before you will know whether the purchase was justified.

An inaccurate estimate of asset needs can have serious consequences. If you invest too much in assets, you incur unnecessarily heavy expenses. Regaining lost customers involves heavy marketing expenses and may even require price reductions or product improvements, both of which are costly. We will present an example of how a largescale engineering project evolves and what types of financial decisions have to be considered in the process of executing such a project.

As shown in Figure 1. By , the Gigafactory will reach full capacity and produce more lithium-ion batteries annually than what were produced worldwide in It says the scale will help drive the cost of batteries down, thereby helping them reach the mass manufacturing target. Obviously, this level of an engineering decision is far more complex and more significant than a business decision about when to introduce a new product.

Projects of this nature involve large sums of money over long periods of time, and it is difficult to estimate the magnitude of economic benefits in any precise manner. Even if we can justify the project on economic reasoning, how to finance the project is another issue. Any engineering economic decision pertaining to this type of a large-scale project will be extremely difficult to make. How Much Would It Cost?

The biggest question remaining about the mass production of the electric vehicles is battery production cost. Economies of scale would help as production volumes increase, but further advances in engineering also would be essential. With the initial engineering specification, Tesla has designed the powerpacks and their associated circuitry, each of them contains up to 7, standard lithiumion cells of the sort found in laptops.

The Gigafactory could bring Tesla close to that. What Is the Business Risk? This would make the scope for savings limited, and even if the factory does turn out many cheap battery cells, it may not be enough. Technically, the key to increasing range and performance is to improve the efficiency, size, and price of the electronics that manage the power, along with overall vehicle weight. Tesla does not have the same advantages in these areas as it has with its batteries.

Who is right? Nobody knows for sure at this point. Also, if electric-car demand stalls, the question is what we do with the huge output of cheap batteries. A battery plant that is not running will cost Tesla a fortune. Furthermore, competitors, including U. The primary advantage of the design, however, is that the electric vehicle could cut auto pollution to a zero level. This is a feature that could be very appealing at a time when government air-quality standards are becoming more rigorous and consumer interest in the environment is getting stronger.

However, in the case of the Tesla products, if a significant reduction in production cost never materializes, demand might remain insufficient to justify the investment in the battery factory. Will enough batteries be produced, for example, to generate sufficient profits?

While the Gigafactory will be of another level of engineering achievement, the bottom-line concern is its financial performance over the long run. Regardless of the form of a business, each company has to produce basic financial statements at the end of each operating cycle typically, a year.

These financial statements provide the basis for future investment analysis. Suppose that you are the president of Tesla. What objectives would you set for the company? While all firms operate to generate profit, what determines the market value of a company are not profits, per se, but rather, cash flows. It is, after all, the available cash that determines the future investments and growth of the firm.

This increased demand, in turn, will cause stock prices, and hence, shareholder wealth, to increase. We will consider this important issue in Chapter Since some ideas are good, while others are not, it is necessary to establish procedures for screening projects.

Many large companies have a specialized project analysis division that actively searches for new ideas, projects, and ventures. Goodreads helps you keep track of books you want to read. Want to Read saving….

Want to Read Currently Reading Read. Other editions. Enlarge cover. Error rating book. Refresh and try again. Open Preview See a Problem? Details if other :. Thanks for telling us about the problem. Return to Book Page. Fundamentals of Engineering Economics by Chan S. New from the author of the best-selling "Contemporary Engineering Economics" book, "Fundamentals of Engineering Economics" offers concise, but in-depth coverage of all fundamental topics of Engineering Economics.

A four-part organization outlines an understanding of money and its management, how to evaluate business and engineering assets,.

For individuals interested in the field of industrial, civil, mechanical and electrical engineering. Get A Copy. Published by Prentice Hall first published October 1st More Details Original Title. Other Editions Friend Reviews. To see what your friends thought of this book, please sign up. To ask other readers questions about Fundamentals of Engineering Economics , please sign up.

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