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[Ebook PDF] Engineering Economic Analysis, 12th Edition
ISBN-13: 978-0199339273
ISBN-10: 0199339279
Author: Donald G. Newnan (Author), Jerome P. Lavelle (Author), Ted G. Eschenbach (Author)
The twelfth edition of the market-leading Engineering Economic Analysis offers comprehensive coverage of financial and economic decision making for engineers, with an emphasis on problem solving, life-cycle costs, and the time value of money. The authors’ concise, accessible writing, practical emphasis, and contemporary examples linked to students’ everyday lives make this text the most popular among students.
New to the Twelfth Edition
* 500 new or revised problems–answers to most even problems now in Appendix E
* Six new and nine updated chapter-opening vignettes provide extended real-world examples
* Twenty new Excel tutorial videos added to the updated set of thirty-six from the eleventh edition
* New visual “five-button solutions” help simplify the use of spreadsheets and calculators
* A new Appendix 12A aggregates coverage of personal income taxes, which now includes time value of money problems.The twelfth edition of the market-leading Engineering Economic Analysis offers comprehensive coverage of financial and economic decision making for engineers, with an emphasis on problem solving, life-cycle costs, and the time value of money. The authors’ concise, accessible writing, practical emphasis, and contemporary examples linked to students’ everyday lives make this text the most popular among students. In addition, with its extensive support package and logical progression of topics, this is the easiest book to teach from.
PREFACE
Our goal has been, and still is, to provide an easy-to-understand and up-todate presentation of engineering economic analysis for today’s students. That means the book’s writing style must promote the reader’s understanding. We humbly note that our approach has been well received by engineering professors—and more importantly, by engineering students through eleven previous editions.
Hallmarks of this Book
Since it was first published in 1976, this text has become the market-leading book for the engineering economy course. It has always been characterized by
• A focus on practical applications. One way to encourage students to read the book, and to remember and apply what they have learned in this course, is to make the book interesting. And there is no better way to do that than to infuse the book with real-world examples, problems, and vignettes.
• Accessibility. We meet students where they are. Most don’t have any expertise in accounting or finance. We take the time to explain concepts carefully while helping them apply them to engineering situations
• Superior instructor and student support packages. To make course easier to understand, learn, and teach, Oxford University Press has produced the best support package av lable. We offer more for students and instructors than any competing text.
th Changes to the 12 Edition
This edition has many significant improvements designed to keep the text the most current and useful one on the market. We also implemented the following significant pedagogical changes that make the material easier to learn.
• Factor notation has long provided a clear way to describe engineering economic calculations supported by tables—which is continued in this edition. This edition replaces the 11th edition’s language ofTVM calculators and an extended factor notation with a visually distinctive notation. This edition inaugurates the use of 5-button solutions, which summarize which four of the five time value of money variables are
the inputs and which one is being solved for. As det led in Appendix B, students can use:
• spreadsheet annuity functions a financial calculator
• an HP 33s or 35s—which can be used on the FE exam
• Previous editions provided answers to about 12% of the problems—with answers given at the problem’s end. In this edition, we have tripled the number of problems with provided answers, and have collected those answers in Appendix E. There is an answer icon next to even-numbered problems that have a numeric answer provided.
• This allows instructors to easily pick a preferred mix of problems with and without answers.
• It allows students to work on assigned problems without knowing what the answer is until they check after they are done (or stuck).
• It allows students to work on extra problems and check their own work.
• Other changes that will make the problem sets easier for students and faculty to use include the following:
• Several chapters have additional headings to better group the problems.
• Problems have been reordered from easy to hard within each heading.
• Solutions in the Instructor’s Manual were completed and text corrections were made before the book was finalized for printing.
• Each chapter now opens with a list of key words, which are boldfaced when they are first explained in the text. They are also indexed. This edition and its extensive support package have been updated and improved in many ways.
• Six new vignettes are included and nine have been revised to ensure that the set of vignettes is timely, interesting, and motivating to the students. Ethics questions continue to be part of the Questions to Consider.
• Nearly 400 problems have been revised and nearly 100 new ones have been written. The text has now edged slightly closer to a total of 1400 problems, with over 10% contributed by adopters who have class-tested fresh examples and new question formats.
• Over 20 new Excel tutorials have been added to the 36 available with the last edition.
The latter tutorials have been revised and updated as needed. Updates to the Student Study Guide, Instructor’s Manual, Instructor PowerPoint slides, the test bank, etc., were also completed for this edition.
• Chapter 1 (Making Economic Decisions) now introduces spreadsheets—including what-if analysis and data blocks as part of operational economics.
• Chapter 2’s (Estimating Engineering Costs and Benefits) name change emphasizes improved coverage and material on estimating benefits. It also uses spreadsheets in the cussion of learning curves.
• Chapter 3 (Interest and Equivalence) uses spreadsheets and graphs to encourage students to explore the power of compound interest on their own. It also introduces 5-button solutions, as part of a discussion of the use of formulas, tabulated factors, and spreadsheets for time value of money calculations.
Chapter 4 (Equivalence for Repeated Cash Flows) includes nine new 5-button solutions in conjunction with traditional factor-based solutions. The connection between factors and annuity functions is reinforced in Chapters 5- 8, which collectively have another 24 5-button solutions.
• Appendix 7 A (Difficulties in Solving for an Interest Rate) has been rewritten to emphasize graphing present worth over positive and negative interest rates. This more inti tive and easily understood approach also illustrates that in many cases the positive root of the present worth equation is a useful IRR that is consistent with using present worth for decision ng. The graphs also clearly show when the present worth is a reliable measure of a project’s attractiveness.
• Chapter 11 (Depreciation) now opens with scussion of an example income statement to show why depreciation matters—it reduces taxable income and taxes. It also more clearly shows that correct answers can be computed by assuming 0%, 50%, or 100% depreciation in the year of disposal.
• Chapter 12 (Income Taxes for Corporations) has separated material on taxes for individuals into Appendix 12A. This focuses the chapter on where engineering economy is applied by employed engineers. This chapter also corrects a common error in engineering economy texts—approximating the after-tax minimum attractive rate of return without accounting for the fact that tax deductibility applies only to the debt
portion of a firm’s capital.
• The new Appen 12A (Income Taxes for Individuals) benefits from being a continuous, focused presentation. In previous tions this material focused on computing this year’s taxes. The new appendix adds the implications over time of taxes on loan repayments, retirement savings, etc. As in every edition, this material has been updated for changes in the tax code.
• Chapter 14 (Inflation and Price Changes) uses the power of spreadsheets early in the chapter to demonstrate the equivalence of constant-value and nominal-dollar approaches. It also increases the emphasis that these approaches must respectively be matched with real and market value interest rates. A new point is that equivalent annual approaches may only be meaningful if done in constant-value dollars.
• Chapter 16 (Economic Analysis in the Public Sector) now includes a spreadsheetbased example of 2-way sensitivity analysis for project life and interest rate.
• Appendix B (Time Value of Money Calculations Using Spreadsheets and Calculators) has been rewritten to start with 5-button solutions.
There were several significant changes made in the 10th and 11th editions that we want to highlight for faculty who are more familiar with earlier tions of the text.
• Fifty-four cases in Cases in Engineering Economy 2nd were added on the student CD to the enhanced 10th edition, and with the 11th edition each chapter concludes
with a list of recommended cases.
• Nominal and effective interest rates were moved to Chapter 3, which covers single payment (P and F) cash flows. Chapter 4 now covers multiple cash flows (A, G, and g).
• Chapter 14 (Inflation and Price Changes) includes an improved explanation of why many problems in the text and the real world are described in constant-$ terms and solved with a real interest rate without explicitly including inflation.
A discussion of et cs was included in Chapter I (Making Economic Decisions) and as part of many vignettes.
• An appendix of multiple-choice questions intended to help students prepare for the Fundamentals of Engineering Exam was added (another 24 questions added in 11thtion).
• Chapter 8 (Choosing the Best Alternative) was completely rewritten to use the power of spreadsheets to graphically compare alternatives over a full range of possible interest rates. This is also a more intuitive foundation for incremental analysis.
• End-of-chapter problems were grouped under subheadings to make them easier to find and assign.
• ”Trust Me, You’ll Use s!” test1mo01als from former enginemen economy students were added between chapters 2 and 3.
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