Engineering Economics

J. K. Yates, PhD, BSCE, is a construction consultant, and former Professor and the Program Coordinator for the Construction Engineering Program in the Department of Civil Engineering at San Jose State University, as well as having been the associate editor of the Project Management Institute's (PMI) Project Management Journal for ten years. Dr. Yates has extensive hands-on experience working globally for companies such as Bechtel, Williams Engineering, CH2M Hill Consulting Engineers, and Morrison- Knudsen. A member of the American Society of Civil Engineers, PMI, and the American Association of Cost Engineers International, Dr. Yates has published over forty-five refereed journal articles on construction engineering, project management, and international engineering and construction. Dr. Yates was awarded the Ron Brown Presidential Award for Industry-Education Partnership, May 2000, and was also awarded by President Clinton for research collaboration with the Hewlett Packard Foundation. Dr. Yates also received the President's Special Recognition Award, December 1996, awarded by the president of San Jose State University. The Associated General Contractors (AGC) selected Dr. Yates as the Outstanding Educator in Construction in America in 1997, and the Engineering News-Record selected Dr. Yates as One of Those Who Made Their Mark in Construction in 1991.

"Probably the best text available on engineering economics for construction education. Written in a very no-nonsense manner with a heavy emphasis on understanding the formulas and what they mean as opposed to just filling in the blanks."—David W. Martin, Central Washington University, Ellensburg, Washington, USA"This book covers relevant topics in engineering: the economics of decision making, and the cost of money over time. Every concept is fully explained and the rigor is incrementally incorporated to the text, so it is actually a pleasant book to read. This book will be of great interest not only to engineers but to other decision makers in the delivery of capital projects. It goes beyond the economic evaluation of projects, by providing a deep and clear explanation of associated topics such as taxes and accounting."— Daniel Castro-Lacouture, Georgia Institute of Technology, Atlanta, Georgia, USA

• IntroductionIntroduction to Engineering EconomicsMoney as a Means of Commerce Improving the Economics of ProjectsManaging Costs and ProfitsSummaryKey TermsProblemsTime Value of MoneyDefinition of InterestDefinition of Engineering Economic TermsCash Flow DiagramsSummaryKey TermsProblemsPresent Worth, Future Worth, and Unknown Interest RatesDefinition of EquivalenceSingle Payment Compound Amount Factor¾ Future WorthPresent Worth Compound Amount Factor¾ Present WorthCompounding Periods Different than One YearSolving for Unknown Interest RatesUsing Factor Tables to Solve for Present and Future WorthSummaryKey TermsProblemsAnnuitiesUniform Series Compound Amount Factor¾ Future Worth of AnnuitiesUniform Series Sinking Fund Factor¾ Annuity of a Future ValueUniform Series Present Worth Recovery Factor¾ Present Worth of AnnuitiesUniform Series Capital Recovery Factor¾ Annuity of a Present WorthPresent Worth of an Infinite Uniform Series¾ Unlimited Payment SeriesUsing Factor Tables to Solve for AnnuitiesSummaryKey TermsProblemsArithmetic and Geometric GradientsDefinition of Arithmetic Gradients Future Worth of Arithmetic Gradient AmountsPresent Worth of Arithmetic Gradient Amounts Noncontinuous Arithmetic Gradient SeriesUsing Factor Tables to Solve for GradientsPerpetual Life Gradients¾ Infinite SeriesGeometric GradientsUsing Factor Tables to Solve for GradientsSummaryKey TermsProblemsMultiple FactorsCombining Factors to Solve for Future or Present Worth of Different SeriesTwo Sequential Series with Different Interest RatesCompounding Periods Not Equal to Payment PeriodsSummaryKey TermsProblemsPresent Worth Capitalized Cost Analysis¾ Present Worth Method of Comparing AlternativesComparing Alternatives on the Basis of Equivalent Present WorthCapitalized Cost Calculations for Perpetual Life SeriesPresent Worth of Least Common Multiples of SeriesSummaryKey TermsProblemsEquivalent Uniform Annual Cost Comparison MethodComparing Alternatives Based on their Equivalent Uniform Annual CostEquivalent Uniform Annual Cost of Perpetual Life AlternativesUsing Trade-in Value and Sunk Costs in CalculationsSummaryKey TermsProblemsRate or Return Method for Comparing AlternativesSolving for the Interest Rate where the Present Sum Equals the Future SumSolving for the Unknown Interest Rate using InterpolationEvaluation by Incremental Investment Analysis¾ Incremental Rate of ReturnSummaryKey TermsProblemsReplacement Analysis Definitions used in Replacement AnalysisDetermining when to Replace an AssetAnalyzing Mutually Exclusive AlternativesSummaryKey TermsProblemsBreakeven Analysis ComparisonsFixed Costs and Variable CostsLocating the Breakeven PointSummaryKey TermsProblemsBenefit/Cost EvaluationsDefinition of Terms used in Benefit/Cost EvaluationsBenefit/Cost Ratio AnalysisSummaryKey TermsProblemsDepreciationDefinition of DeprecationComponents Considered when Calculating DepreciationMethods for Calculating DepreciationSummaryKey TermsProblemsTaxes and After Tax Economic AnalysisCorporate TaxesAfter Tax Cash FlowsIndividual TaxesSummaryKey TermsProblemsAppendix I Summary of Equations and Cash Flow DiagramsAppendix II Factor TablesAppendix III Using Spreadsheets to Solve Engineering Economic ProblemsIndex