Paul Marnell

Engineering Economics for the 21st Century

• Gebundenes Buch

Produktbeschreibung

Since there are more than a dozen current texts on engineering economics, why did I choose to write one? It is because current expositions differ little from that presented by Eugene L. Grant et al. in 1982 except for additional topics from the realm of managerial economics. Hence, the practice of engineering economics is still constrained by the following limitations of past and present engineering economics texts 1. Universal reliance on limited tabulations of eight of the 12 factors of engineering economics. 2. Limited use of the non tabulated geometric gradient series. 3. The need to use factor equations when tabulated factors are not available. 4. The tedious practice of manually preparing some common least-cost studies. 5. Defining the IRR in Chapter 5 or 6 as "the interest rate earned on the unrecovered balance of an investment so that the balance is zero at the end of the investment's life." But the meaning of "balance" is rarely referenced in the Index of the book! 6. Not discussing the existence of quasi-simple investments and, therefore, not providing the method for finding their IRRs. 7. Not discussing the existence of four classes of non-simple investments and, therefore, not providing methods for finding their IRRs. The overarching goals and the corresponding results of this text are the elimination of these seven deficiencies in the contemporary body of knowledge of engineering economics. The 12 page Preface explains how this is accomplished, and the following is a synopsis of it: 1. Limitations 1, 2, and 3 are eliminated by using the 12-Factor Calculator, a simple easy-to-use Excel spreadsheet that provides the values of the 12 Factors for arbitrary values of i, g (gi), and six (6) values N. 2. Limitation 4 is eliminated by using the ANNUAL WORTH COMPARISON Calculator with Component Replacement and the PRESENT WORTH COMPARISON Calculator with Component Replacement in Chapters 4 and 5, respectively. 3. Limitation 5 is eliminated in Chapter 2 by defining the Balance Equation and using it to derive the General Polynomial Equation (GPE). The solution of the GPE leads naturally and logically to the IRR of a loan or simple investment. Introducing Excel's IRR function in Chapter 2, makes it available in all subsequent chapters for finding the IRR of various investments. For example, it is used in Chapter 3 to find the IRR of a "spec" house (a house that is initially built without a buyer). 4. Limitation 6, not recognizing the existenceof quasi-simple investments is covered in Chapter 6. Step-by-Step 6.1 is a simple procedure for finding the IRR of a quasi-simple investment. Two examples illustrate its use. 5. Limitation 7, not recognizing the existence of the four practical non-simple investments is covered in Chapter 7. This chapter provides three (3) Step-by-Steps for finding the IRRs of these four (4) types of non-simple investments and seven (7) numerical examples that illustrate the calculations. Paul Marnell, Eng.Sc.D. (Columbia University) is an Associate Professor of Chemical Engineering at Manhattan College with 25 years of teaching engineering economics and chemical plant design. His doctoral thesis was "The Lubrication Mechanism of the Hip joint", which was partially funded by the Easter Seal Foundation. Dr. Marnell attended the Oak Ridge School of (Nuclear) Reactor Technology (ORSORT) under the sponsorship of the Foster Wheeler Corporation. He has 15 years of multi-industry experience that includes: (1) Nuclear engineering positions at Foster Wheeler, Nuclear Development Associates, and Stone and Webster Engineering Corporation. (2) Interim U.S. representative for Lurgi's coal gasification process. (3) Manager of Lurgi's U.S. Environmental Projects, the first of which was the Lurgi Sulfacid plant built for the United States Steel Corporation at Neville Island, PA. (4) Consultant to and summer employee of Brookhaven National Laboratory (BNL) where he initiated their coal-water fuel program and wrote several reports and presented papers describing it.

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Produktdetails

• Verlag: Wiley
• Seitenzahl: 240
• Erscheinungstermin: 21. März 2016
• Englisch
• Abmessung: 257mm x 178mm x 18mm
• Gewicht: 612g
• ISBN-13: 9781118929032
• ISBN-10: 1118929039
• Artikelnr.: 42954047

Autorenporträt

Paul Marnell, Eng.Sc.D. (Columbia University) is an Associate Professor of Chemical Engineering at Manhattan College with 25 years of experience teaching engineering economics and chemical plant design.  His doctoral thesis was "A Theoretical Evaluation of the Persistence of Hydrodynamic Lubrication in the Hip Joint During Walking," which was funded by Orthopedic Research Associates.  Dr. Marnell attended the Oak Ridge School of (Nuclear) Reactor Technology (ORSORT) under the sponsorship of the Foster Wheeler Corporation.  He has 15 years of multi-industry experience that includes: (1) Nuclear engineering positions at Foster Wheeler, Nuclear Development Associates, and Stone and Webster Engineering Corporation. (2) Interim U.S. representative for Lurgi's coal gasification process. (3) Manager of Lurgi's U.S. Environmental Projects, the first of which was the Lurgi Sulfacid plant built for the United States Steel Corporation at Neville Island, PA. (4) Consultant to and summer employee of Brookhaven National Laboratory (BNL) where he initiated their coal-water fuel program and wrote several reports and presented papers describing it.

Inhaltsangabe

Preface VII
1 Overview of Engineering Economics
1.1 Why Study Engineering Economics 1
1.2 Text Objectives 2
2 Foundation of Engineering Economics
2.1 Loan Elements
2.1.1 Monies Transferred 3
2.1.2 Balances, Interest Rate & Total Interest 4
2.1.3 Interest Rate Specifications 5
2.1.4 Analogy Between Loans & Rentals 6
2.2 Cash Flows
2.2.1 Definitions 7
2.2.2 Cash Flow Diagram 7
2.3 Fundamental Repayment Equation
2.3.1 Definitions 8
2.3.2 Derivation 9
2.3.3 Total & Normalized Total Interests 10
2.3.4 Using the Fundamental Repayment Equation 10
2.4 Worth, Factors & Equivalence
2.4.1 Worths of a Cash Flow 14
2.4.2 Factors for a Cash Flow 16
2.4.3 12-FACTOR Calculator 18
2.4.4 Present & Future Worths of a Series 19
2.4.5 Equivalence 20
2.5 General Repayment Equation (GRE)
2.5.1 Balance Equation 21
2.5.2 Derivation of the GRE 22
2.5.3 Total Interest Equation 23
2.5.4 Applications of the GRE 24
2.6 Uniform Series Factors & Uniform Worth Factors of a Cash Flow
2.6.1 Present Worth Factor 26
2.6.2 Future Worth Factor 29
2.6.3 Uniform Worth of a Present Cash Flow 30
2.6.4 Uniform Worth of a Future Cash Flow 33
2.6.5 Shifted Basic Series 36
2.7 Gradient Series Factors
2.7.1 Present Worth Factor 39
2.7.2 Future Worth Factor 43
2.7.3 Uniform Worth of a Gradient Series 43
2.8 Geometric Gradient Series Factors
2.8.1 Present Worth Factor 46
2.8.2 Net Present Worth Factor 48
2.8.3 Future Worth Factor 50
2.8.4 Uniform Worth of a Geometric Gradient Series 51
2.9 Rate of Return of a Simple Investment
2.9.1 Comparison of Loans & Investments 53
2.9.2 Rate of Return of an Investment 54
2.9.3 Simple Investments 56
2.10 Calculating the IRR% with Excel
2.10.1 IRR Function 57
2.10.2 Spreadsheet Cells 59
2.10.3 Goal Seek Command 59
2.11 Classification of the Examples 60
2.12 Developing the 12-FACTOR Calculator
2.12.1 Creating the 12-Factor Functions in Excel 61
2.12.2 12-FACTOR Calculator 62
2.12.3 Excel's Three Factor Functions 63
2.13 Summary 64
2.14 Problems 65
3 Intermediate Balances and Other Interest Rates & Series
3.1 Intermediate Balances
3.3.1 Intermediate Balance Equations 69
3.1.2 Annual Interests of a Home Mortgage 71
3.1.3 Recursive Calculation of Intermediate Balances 74
3.2 Other Interest Rates
3.2.1 Annual Percentage Yield 76
3.2.2 Simple Interest 78
3.2.3 Continuous Compounding 79
3.3 Composite Series
3.3.1 Introduction 81
3.3.2 Decreasing Linear Series 83
3.3.3 Composite Series Transformation Procedure 84
3.4 Summary 86
3.5 Problems 86
4 Annual Worth Comparisons
4.1 Introduction
4.1.1 Definitions 89
4.1.2 Rationale & Consistency of Annual Worth Comparisons 90
4.2 Specified Service Time
4.2.1 Introduction 91
4.2.2 ANNUAL WORTH COMPARISON Calculator 92
4.2.3 Using the ANNUAL WORTH COMPARISON Calculator 93
4.2.4 Component Replacement Costs 94
4.2.5 Adding Component Replacement Costs to the ANNUAL WORTH COMPARISON
Calculator 95
4.2.6 Effect of the MARR on a Least-Cost Study 96
4.3 Indefinite Service Time
4.3.1 Least Common Multiple 97
4.3.2 Repeatability Assumption 98
4.3.3 Comparison of Specified & LCM Service Times 99
4.3.4 Disadvantages of the LCM Service Time 101
4.4 Other Cost Alternatives
4.4.1 Extra Capacity Versus Staged Construction 101
4.4.2 Dissimilar Alternatives 104
4.4.3 Irregular Alternatives 105
4.5 Perpetual Service Time
4.5.1 Definition 107
4.5.2 Three Annual Worth Limits 107
4.6 Annual Worth Investment Calculations 109
4.6 Summary 111
4.7 Problems 112
5 Present Worth Comparisons
5.1 Specified Service Time
5.1.1 Present Worths Without Replacement Costs 117
5.1.2 PRESENT WORTH COMPARISON Calculator 119
5.1.3 Using the PRESENT WORTH COMPARISON Calculator 119
5.1.4 Component Replacement Costs 120
5.1.5 Adding Component Replacement Costs to the PRESENT WORTH COMPARISON
Calculator 122
5.2 Other Cost Alternatives
5.2.1 Extra Capacity & Staged Construction Alternatives 123
5.2.2 Dissimilar & Irregular Alternatives 124
5.3 Perpetual Service Time
5.3.1 Definitions 124
5.3.2 Capitalized Costs of the Basic Series 125
5.3.3 Comparison of Annual Worth Limits & Capitalized Costs 125
5.4 Present Worth Investment Calculations 127
5.5 Choosing a Worth Calculation Method
5.5.1 Least-Cost Studies 129
5.5.2 Other Calculations 129
5.6 Summary 129
5.7 Problems 130
6 Simple and Quasi-Simple Investments
6.1 Simple Investments: A Quick Review
6.1.1 Definition 133
6.1.2 Properties 134
6.2 IRR% of a Manufacturing Plant Investment & End-of-Year Convention
6.2.1 Disbursement Classes 135
6.2.2 Cash Flow Timing 136
6.2.3 End-of-Year Convention 136
6.2.4 Pretax IRR% of a Chemical Plant Investment (SI-Class) 138
6.3 Simple Cost Reduction Investments
6.3.1 Definition 141
6.3.2 Calculating the IRR% (SI-Class) 141
6.4 Multi-Simple Investments
6.4.1 Definitions, Properties & Occurrences 142
6.4.2 IRR of a Quasi-Simple Investment (QSI-Class) 143
6.5 Creating a Polynomial Root Finder in Mathematica
6.5.1 Creating the polyRoots Function 146
6.5.2 Using the polyRoots Function 147
6.6 Incremental Investment Criterion 148
6.7 Summary 149
6.7 Problems 149
7 Non-Simple Investments
7.1 Five Fundamental Properties of Simple & Quasi-Simple Investments
7.1.1 Negative First Cash Flow 153
7.1.2 Positive Last Cash Flow 153
7.1.3 Odd Number of Cash Flow Sign Changes 154
7.1.4 Unique Rate of Rate of Return 154
7.1.5 Positive Balances 154
7.1.6 Fundamental Properties of the Four Basic Non-Simple Investments 154
7.2 Down Payment Investments
7.2.1 Definition, Properties & Occurrence 154
7.2.2 Finding the RORs of a Down Payment Investment 155
7.2.3 Meaning of Negative Balances 157
7.2.4 Mixed Down Payment Investment 157
7.2.5 Properties of a Mixed Down Payment Investment 159
7.3 Termination Investments
7.3.1 Definition, Properties & Occurrence 161
7.3.2 Mixed Termination Investment 162
7.4 Down Payment & Termination Investments
7.4.1 Definition, Properties & Occurrence 164
7.4.2 Mixed Down Payment & Termination Investment 165
7.5 Bi-Simple & Tri-Simple Investments
7.5.1 Definition, Properties & Occurrences 167
7.5.2 Mixed Bi-Simple Investment 167
7.5.3 Mixed Tri-Simple Investments: Two Simple Internal Investments 170
7.6 Summary 171
7.7 Problems 172
8 Mutually Exclusive Investments
8.1 Comparing Two Simple Mutually Exclusive Investments
8.1.1 Definitions 175
8.1.2 Basic MEI Selection Model 176
8.1.3 Relationships Between the Three IRRs 178
8.2 Comparing Three or More Mutually Exclusive Investments
8.2.1 General MEI Selection Procedure 180
8.2.2 Relative Values of the Challenger-Defender IRRs 182
8.2.3 Effect of the MARR on an MEI Study 182
8.3 Equal Initial Cash Flows 183
8.4 Summary 184
8.5 Problems 184
9 After Tax IRR%
9.1 Income Taxes & Depreciation
9.1.1 Combined Income Tax Rate 187
9.1.2 Taxable Income, Income Tax & After Tax Cash Flow 188
9.1.3 Depreciation Expenses 188
9.2 MACRS Depreciation
9.2.1 Percentage Depreciations 191
9.2.2 Net Recovered Capital 191
9.2.3 Calculating an After Tax IRR% 192
9.3 Start-Up Cost & Time
9.3.1 Definitions 192
9.3.2 Percentage Depreciations 192
9.3.3 Calculating the After Tax IRR% with a Start-Up Time 194
9.4 Straight Line Depreciation 194
9.5 Book Depreciation Methods
9.5.1 Straight Line Depreciation 197
9.5.2 Double Declining Balance Depreciation 198
9.5.3 Sum-of-Years-Digits Depreciation 200
9.6 Brief History of U.S. Tax Laws 203
9.7 Summary 203
9.8 Problems 203
10 Sensitivity Analysis
10.1 Creating an IRR% Sensitivity Table 208
10.2 Staged Construction & Break Even Point 211
10.3 Summary 212
10.4 Problems 213
Chapter 11 Other Profitability Measures
11.1 Net Present Value
11.1.1 A 15 Second Review of Calculating an IRR 215
11.1.2 Screening the IRR with a Net Present Value Calculation 216
11.1.3 Calculating a Net Present Value with Excel 216
11.1.4 Comparing Two or More Mutually Exclusive Investments 217
11.2 Accounting Rate of Return 219
11.3 Benefit Cost Ratio 220
11.4 Payback Period
11.4.1 Definition & Calculation 221
11.4.2 Rationale for the Payback Period 222
11.5 Investment Information Package 224
11.6 Summary 224
11.7 Problems 225
Index 227