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Hardback 528 pp.
200 figures; 21 tables; 14 photos, 8" x 10"



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Imprint: OUP Canada

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Engineering Economic Analysis

Fourth Canadian Edition

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.

Readership : Engineering Economic Analysis, 4Ce, is intended for second- and third-year students taking courses in engineering economics taught out of engineering departments, but can be found in economics and business faculties.


  • "This textbook is comprehensive and detailed while offering students chapter-by-chapter motivation. The learning experience is enriched by questions that get students to reflect on the context, and by practice questions that reinforce students' understanding."
    --Nadine Ibrahim, University of Toronto

  • "Well organized and very helpful."
    --Juan Pernia, Lakehead University

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 Decision-Making for Current Costs
- Engineering Costs
-- Fixed, Variable, Marginal, and Average Costs
-- Sunk costs
-- Opportunity Costs
-- Recurring and Non-Recurring Costs
-- Incremental Costs
-- Cash Costs versus Book Costs
-- Life-Cycle Costs
- Cost Estimating
-- Types of Estimate
-- Difficulties in Estimation
- Estimating Models
-- Per-Unit Model
-- Segmenting Model
-- Cost Indexes
-- Power-Sizing 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
- Single-Payment 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
-- End-of-Year 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. Benefit-Cost Ratio and Other Analysis Techniques
- Public Sector Investment Objectives
- Viewpoint for Analysis
- Selecting an Interest Rate
-- No Time-Value-of-Money Concept
-- Cost-of-Capital Concept
-- Opportunity-Cost Concept
-- Recommended Concept
- The Benefit-Cost Ratio
- Incremental Benefit-Cost Analysis
-- Elements of the Incremental Benefit-Cost 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
- Break-Even 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
-- Straight-Line Depreciation
-- Sum-of-Years'-Digits Depreciation
-- Declining-Balance Depreciation
- Unit-of-Production Depreciation
- Depreciation for Tax Purposes - Capital Cost Allowance
-- The 50% rule, or Half-Year Convention
-- Accelerated CCA-50% Straight Line
-- Calculating the CCA-Schedule 8
- Calculating the CCA and the UCC (without Using Schedule 8)
- Depreciation and Asset Disposal
- Natural Resource Allowances
-- Percentage Depletion
-- Cost Depletion
12. After-Tax 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 - Books-Closed Assumption
- Capital Tax Factors and Books Open
- Calculating After-Tax 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 After-Tax Rate of Return
13. Replacement Analysis
- The Replacement Problem
- Replacement Analysis Flow Chart
- Minimum-Cost 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
- After-Tax Replacement Analysis
-- Marginal Costs on an After-Tax Basis
-- Minimum-Cost 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 After-Tax 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

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
- Chapter-opening vignette
Test Generator:
- Short answer/essay questions
- Multiple choice questions
Image Bank:
- Figures and tables from the text
Solutions Manual:
- Solutions to all in-text problems
Student Study Resources:
- Solutions to icon-indicated problems
- Definition flashcards
- Self-grading quizzes
- Excel spreadsheets
- Annotated recommended online resources NEW
- Compound Interest Tables
E-book 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

Special Features

  • Chapter-opening vignettes highlight historic feats of Canadian engineering and expose students to reality-based problems that illustrate key concepts applied to the working world.
  • Clear explanations and writing - highly regarded as the most readable text on the market, this text offers clear explanations of economic concepts in simple language without sacrificing content.
  • Canadian and global perspectives prepare students for careers at home and abroad.
  • A wealth of practice problems and exercises, ranging from basic to complex, help students to master technical concepts and consider the economic and technical viability of potential solutions.
  • End-of-chapter questions are organized by level of difficulty, helping students build upon their understanding gradually.
  • Coverage of Canadian taxes and accounting practices equips students with indispensable knowledge required for working in this country.
  • Coverage of ethics in engineering prepares students to respond conscientiously to ethical dilemmas in the field.
New to this Edition
  • New chapter on project management reflects this topic's importance as a major component of engineering economics courses and a Canadian Engineering Accreditation Board (CEAB) requirement. (Ch. 15)
  • Condensed and streamlined in order to better reflect the topics covered in a one-semester course.
  • Up-to-date coverage of money, inflation, and the Bank of Canada, more Canadian examples throughout, and new discussion on the environmental impacts of engineering projects makes this the most current resource available.