Donald G. Newnan, John Jones, John Whittaker, Ted G. Eschenbach and Jerome P. Lavelle
Praised for its accessible tone and extensive problem sets, this trusted text familiarizes students with the universal principles of engineering economics. This essential introduction features a wealth of specific Canadian examples and has been fully updated with new coverage of inflation and
environmental stewardship as well as a new chapter on project management.
Each chapter also includes:
 Learning Objectives
 Summary
 Problems
 Questions to Consider
 List of Key Terms
Preface and Acknowledgements
1. Economic Decisions, Engineering Costs, and Cost Estimating
 A Sea of Problems
 Simple Problems

Intermediate Problems
 Complex Problems
 The Role of Engineering Economic Analysis
 Examples of Engineering Economic Analysis
 The Decision Making Process
 Rational Decision Making
 Ethics
 Ethical Dimensions in Engineering Decision Making
 Importance of
Ethics in Engineering and Engineering Economy
 Engineering DecisionMaking for Current Costs
 Engineering Costs
 Fixed, Variable, Marginal, and Average Costs
 Sunk costs
 Opportunity Costs
 Recurring and NonRecurring Costs
 Incremental Costs
 Cash Costs
versus Book Costs
 LifeCycle Costs
 Cost Estimating
 Types of Estimate
 Difficulties in Estimation
 Estimating Models
 PerUnit Model
 Segmenting Model
 Cost Indexes
 PowerSizing Model
 Triangulation
 Improvement and the Learning
Curve
 Estimating Benefits
 Cash Flow Diagrams
 Categories of Cash Flow
 Drawing a Cash Flow Diagram
2. Accounting and Engineering Economy
 The Role of Accounting
 Accounting for Business Transactions
 The Balance Sheet
 Assets

Liabilities
 Equity
 Financial Ratios Derived from Balance Sheet Data
 The Income Statement
 Financial Ratios Derived from Income Statement Data
 Linking the Balance Sheet, Income Statement, and Capital Transactions
 Traditional Cost Accounting
 Direct and
Indirect Costs
 Indirect Cost Allocation
 Problems with Traditional Cost Accounting
 Other Problems to Watch For
3. Interest and Equivalence
 Computing Cash Flows
 Time Value of Money
 Simple Interest
 Compound Interest
 Repaying a Debt

Equivalence
 SinglePayment Compound Interest Formulas
 Nominal and Effective Interest
 Continuous Compounding
 Single Payment Interest Factors: Continuous Compounding
 Equivalence and Sustainability
4. Equivalence for Repeated Cash Flows
 Uniform Series
Compound Interest Formulas
 Cash Flows That Do Not Match Basic Patterns
 Relationships Between Compound Interest Factors
 The Interest Rate Viewed as Fog
 Arithmetic Gradient
 Derivation of Arithmetic Gradient Factors
 Reality and the Assumed Uniformity of a, G, and
g
 Geometric Gradient
 When Compounding Period and Payment Period Differ
 Uniform Payment Series: Continuous Compounding at Normal Rate r per Period
5. Present Worth Analysis
 Assumptions in Solving Economic Analysis Problems
 EndofYear Convention

Viewpoint of Economic Analysis Studies
 Borrowed Money Viewpoint
 Income Taxes
 Effect of Inflation and Deflation
 Economic Criteria
 Present Worth Techniques
 1. Useful Lives Equal to the Analysis Period
 2. Useful Lives Different from the Analysis
Period
 3. Infinite Analysis Period: Capitalized Cost
 Multiple Alternatives
 Bond Pricing
 Future Worth Analysis
6. Annual Cash Flow Analysis
 Annual Cash Flow Calculations
 Converting a Present Cost to an Annual Cost
 Treatment of Salvage
Value
 Annual Cash Flow Analysis
 Analysis Period
 Analysis Period for a Common Multiple of Alternative Lives
 Analysis Period for a Continuing Requirement
 Infinite Analysis Period
 Some Other Analysis Period
 Mortgages in Canada
 Building an
Amortization Schedule
 Types of Mortgage Available
 Equity
 Mortgage Interest Rates
7. Rate of Return Analysis
 Minimum Attractive Rate of Return
 Internal Rate of Return
 Calculating Rate of Return
 Plot of NPW versus Interest Rate i
 Interest
Rates When There Are Fees or Discounts
 Incremental Analysis
 Analysis Period
 Sensitivity Analysis
 A Second Pitfall
8. BenefitCost Ratio and Other Analysis Techniques
 Public Sector Investment Objectives
 Viewpoint for Analysis
 Selecting an Interest
Rate
 No TimeValueofMoney Concept
 CostofCapital Concept
 OpportunityCost Concept
 Recommended Concept
 The BenefitCost Ratio
 Incremental BenefitCost Analysis
 Elements of the Incremental BenefitCost Ratio Method
 Other Effects of Public
Projects
 Project Financing
 Duration of Projects
 Quantifying and Valuing Benefits and Costs
 Project Politics
 Payback Period
9. Selection of a Minimum Attractive Rate of Return
 Sources of Capital
 Money Generated from the Firm's
Operations
 External Sources of Money
 Choice of Sources of Funds
 Cost of Funds
 Cost of Borrowed Money
 Cost of Capital
 Investment Opportunities
 Opportunity Cost
 Choosing a Minimum Attractive Rate of Return
 Adjusting MARR to Account for Risk
and Uncertainty
 Representative Values of MARR Used in Industry
 Capital Budgeting, or Selecting the Best Projects
10. Uncertainty in Future Events
 BreakEven Analysis
 Optimistic and Pessimistic Estimates
 Probability
 Joint Probability Distributions

Expected Value
 Economic Decision Trees
 Risk
 Risk versus Return
 Simulation
11. Income, Depreciation, and Cash Flow
 Taxation
 Basic Aspects of Depreciation
 Deterioration and Obsolescence
 Depreciation and Expenses
 Types of
Property
 Cost Basis
 Calculating Depreciation
 Depreciation Methods
 StraightLine Depreciation
 SumofYears'Digits Depreciation
 DecliningBalance Depreciation
 UnitofProduction Depreciation
 Depreciation for Tax Purposes  Capital Cost
Allowance
 The 50% rule, or HalfYear Convention
 Accelerated CCA50% Straight Line
 Calculating the CCASchedule 8
 Calculating the CCA and the UCC (without Using Schedule 8)
 Depreciation and Asset Disposal
 Natural Resource Allowances
 Percentage
Depletion
 Cost Depletion
12. AfterTax Cash Flows
 A Partner in the Business
 Calculation of Taxable Income
 Taxable Income of Individuals
 Corporate Income Taxes
 Using CCA to Calculate Net Profit
 Accounting and Engineering Economy

Calculating Net Cash Flow
 Acquiring and Disposing of Assets
 Net Salvage of Land  Capital Gain
 Net Salvage  BooksClosed Assumption
 Capital Tax Factors and Books Open
 Calculating AfterTax Present Worth
 Working Capital Requirements
 Initial Working
Capital
 Increasing Working Capital Requirement
 Loan Financing
 Loan with Equal Principal Repayment
 Loan with Equal Annual Repayment
 Estimating the AfterTax Rate of Return
13. Replacement Analysis
 The Replacement Problem
 Replacement Analysis
Flow Chart
 MinimumCost Life of a New Asset  The Challenger
 Defender's Marginal Cost Data
 Replacement Analysis Technique 1: Defender Marginal Costs Can Be Computed and Are Increasing
 Replacement Repeatability Assumptions
 Replacement Analysis Technique 2: Defender
Marginal Costs Can Be Computed and Are Not Increasing
 Replacement Analysis Technique 3: When Defender Marginal Cost Data Are Not Available
 Complications in Replacement Analysis
 Defining Defender and Challenger First Costs
 Repeatability Assumptions Not Acceptable
 A
Closer Look at Future Challengers
 AfterTax Replacement Analysis
 Marginal Costs on an AfterTax Basis
 MinimumCost Life Problems
Spreadsheets and Replacement Analysis
14. Inflation and Price Change
 Meaning and Effect of Inflation
 How Does Inflation
Happen?
 Hyperinflation
 Definitions for Considering Inflation in Engineering Economy
 Analysis in Real Dollars versus Actual Dollars
 Price Change with Indexes
 What Is a Price Index?
 Composite versus Commodity Indexes
 How to Use Price Indexes in
Engineering Economic Analysis
 Cash Flows That Inflate at Different Rates
 Different Inflation Rates per Period
 Effect of Inflation on AfterTax Calculations
 Inflation and the Buy/Lease Decision
 Inflation and the Cost of Borrowed Money
15. Introduction to Project
Management (NEW!)
 Scientific Management
 The Gantt Chart
 Critical Path Method (CPM)
 CPM and PERT
 The Methods of Operations Research
 Linear Programming and the Simplex Method
 Queuing Theory
Glossary
References
Index
Instructor's Manual:
 Chapter outlines
 Learning objectives
 Basic economic concepts
 Class examples
 Further readings
 Annotated video links NEW
PowerPoint Slides:
 Lecture outline slides, with figures and tables from the text

Chapteropening vignette
Test Generator:
 Short answer/essay questions
 Multiple choice questions
Image Bank:
 Figures and tables from the text
Solutions Manual:
 Solutions to all intext problems
Student Study Resources:
 Solutions to iconindicated
problems
 Definition flashcards
 Selfgrading quizzes
 Excel spreadsheets
 Annotated recommended online resources NEW
Appendix:
 Compound Interest Tables
Ebook ISBN 9780199025114
Donald G. Newnan is a Professor Emeritus at San Jose State University.
John Jones is an Associate Professor in the School of Engineering Science at Simon Fraser University.
John Whittaker is a Professor Emeritus in the Department of Mechanical Engineering at the
University of Alberta.
Ted G. Eschenbach is a Professor Emeritus at the University of Alaska Anchorage.
Jerome P. Lavelle is the Assistant Dean in the College of Engineering at North Carolina State University.
Making Sense in Engineering and the Technical Sciences  Margot Northey and Judi Jewinski
Engineering Communication  Robert Irish and Peter Weiss
Cases in Engineering Economy  William R. Peterson and Ted G. Eschenbach