Test Bank for Contemporary Engineering Economics 5th Edition by Park

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Product details:

• ISBN-10 ‏ : ‎ 0136118488
• ISBN-13 ‏ : ‎ 978-0136118480
• Author: Chan S Park

Contemporary Engineering Economics, 5/e, is intended for undergraduate engineering students taking introductory engineering economics while appealing to the full range of engineering disciplines for which this course is often required: industrial, civil, mechanical, electrical, computer, aerospace, chemical, and manufacturing engineering, as well as engineering technology.

This edition has been thoroughly revised and updated while continuing to adopt a contemporary approach to the subject, and teaching, of engineering economics. This text aims not only to build a sound and comprehensive coverage of engineering economics, but also to address key educational challenges, such as student difficulty in developing the analytical skills required to make informed financial decisions.

Table of contents:

xviii

PART 1 BASICS OF FINANCIAL DECISIONS

1(206)

Engineering Economic Decisions

2(18)

Role of Engineers in Business

5(3)

Types of Business Organization

5(2)

Engineering Economic Decisions

7(1)

Personal Economic Decisions

7(1)

What Makes the Engineering Economic Decision Difficult?

8(2)

Economic Decisions Versus Design Decisions

10(1)

Large-Scale Engineering Projects

10(5)

How a Typical Project Idea Evolves

11(3)

Impact of Engineering Projects on Financial Statements

14(1)

A Look Back in 2009: Did Toyota Make the Right Decision?

14(1)

Common Types of Strategic Engineering Economic Decisions

15(1)

Fundamental Principles of Engineering Economics

16(4)

Summary

18(1)

Short Case Studies

19(1)

Accounting and Financial Decision Making

20(38)

Accounting: The Basis of Decision Making

23(1)

Financial Status for Businesses

24(13)

The Balance Sheet

26(4)

The Income Statement

30(4)

The Cash Flow Statement

34(3)

Using Ratios to Make Business Decisions

37(21)

Debt Management Analysis

39(2)

Liquidity Analysis

41(1)

Asset Management Analysis

42(2)

Profitability Analysis

44(2)

Market Value Analysis

46(2)

Limitations of Financial Ratios in Business Decisions

48(1)

Summary

48(1)

Problems

49(7)

Short Case Studies

56(2)

Interest Rate and Economic Equivalence

58(78)

Interest: The Cost of Money

56(12)

The Time Value of Money

60(1)

Elements of Transactions Involving Interest

61(4)

Methods of Calculating Interest

65(2)

Simple Interest versus Compound Interest

67(1)

Economic Equivalence

68(7)

Definition and Simple Calculations

68(3)

Equivalence Calculations: General Principles

71(4)

Development of Formulas for Equivalence Calculations

75(39)

The Five Types of Cash Flows

75(2)

Single-Cash-Flow Formulas

77(8)

Uneven Payment Series

85(4)

Equal-Payment Series

89(12)

Linear-Gradient Series

101(6)

Geometric Gradient Series

107(7)

Unconventional Equivalence Calculations

114(22)

Composite Cash Flows

114(6)

Determining an Interest Rate to Establish Economic Equivalence

120(2)

Unconventional Regularity in Cash Flow Pattern

122(1)

Summary

123(1)

Problems

124(8)

Short Case Studies

132(4)

Understanding Money and Its Management

136(71)

Nominal and Effective Interest Rates

138(8)

Nominal Interest Rates

138(1)

Effective Annual Interest Rates

139(3)

Effective Interest Rates per Payment Period

142(2)

Continuous Compounding

144(2)

Equivalence Calculations with Effective Interest Rates

146(7)

When Payment Period is Equal to Compounding Period

146(1)

Compounding Occurs at a Different Rate than That at Which Payments are Made

147(3)

Compounding is Less Frequent than Payments

150(3)

Equivalence Calculations with Continuous Payments

153(6)

Single-Payment Transactions

154(1)

Continuous-Funds Flow

155(4)

Changing Interest Rates

159(3)

Single Sums of Money

159(1)

Series of Cash Flows

160(2)

Debt Management

162(18)

Commercial Loans

162(8)

Loan versus Lease Financing

170(3)

Home Mortgage

173(7)

Investing in Financial Assets

180(27)

Investment Basics

180(1)

How to Determine Your Expected Return

181(3)

Investing in Bonds

184(8)

Summary

192(1)

Problems

193(10)

Short Case Studies

203(4)

PART 2 EVALUATION OF BUSINESS AND ENGINEERING ASSETS

207(174)

Present-Worth Analysis

208(62)

Describing Project Cash Flows

210(4)

Loan versus Project Cash Flows

210(3)

Independent versus Mutually Exclusive Investment Projects

213(1)

Initial Project Screening Method

214(6)

Payback Period: The Time It Takes to Pay Back

214(3)

Benefits and Flaws of Payback Screening

217(1)

Discounted Payback Period

218(1)

Where Do We Go from Here?

219(1)

Discounted Cash Flow Analysis

220(8)

Net-Present-Worth Criterion

220(4)

Meaning of Net Present Worth

224(2)

Basis for Selecting the MARR

226(2)

Variations of Present-Worth Analysis

228(7)

Future-Worth Analysis

228(3)

Capitalized Equivalent Method

231(4)

Comparing Mutually Exclusive Alternatives

235(35)

Meaning of Mutually Exclusive and “Do Nothing”

235(4)

Analysis Period

239(1)

Analysis Period Matches Project Lives

240(3)

Analysis Period Differs from Project Lives

243(7)

Analysis Period is Not Specified

250(3)

Summary

253(1)

Problems

254(13)

Short Case Studies

267(3)

Annual Equivalent-Worth Analysis

270(50)

Annual Equivalent-Worth Criterion

272(7)

Fundamental Decision Rule

272(3)

Annual-Worth Calculation with Repeating Cash Flow Cycles

275(2)

Comparing Mutually Exclusive Alternatives

277(2)

Capital Costs Versus Operating Costs

279(3)

Applying Annual-Worth Analysis

282(7)

Benefits of AE Analysis

282(1)

Unit Profit or Cost Calculation

283(2)

Make-or-Buy Decision—Outsourcing Decisions

285(2)

Pricing the Use of an Asset

287(2)

Life-Cycle Cost Analysis

289(6)

Design Economics

295(25)

Summary

304(1)

Problems

305(11)

Short Case Studies

316(4)

Rate-of-Return Analysis

320(61)

Rate of Return

322(3)

Return on Investment

323(1)

Return on Invested Capital

324(1)

Methods for Finding the Rate of Return

325(12)

Simple versus Nonsimple Investments

325(2)

Predicting Multiple l’s

327(3)

Computational Methods

330(7)

Internal-Rate-of-Return Criterion

337(14)

Relationship to PW Analysis

337(1)

Net-Investment Test: Pure versus Mixed Investments

337(3)

Decision Rule for Pure Investments

340(2)

Decision Rule for Mixed Investments

342(9)

Mutually Exclusive Alternatives

351(30)

Flaws in Project Ranking by IRR

351(1)

Incremental Investment Analysis

351(8)

Handling Unequal Service Lives

359(4)

Summary

363(1)

Problems

363(15)

Short Case Studies

378(3)

PART 3 ANALYSIS OF PROJECT CASH FLOWS

381(158)

Cost Concepts Relevant to Decision Making

382(46)

General Cost Terms

384(3)

Manufacturing Costs

385(1)

Nonmanufacturing Costs

386(1)

Classifying Costs for Financial Statements

387(3)

Period Costs

387(1)

Product Costs

387(3)

Cost Classification for Predicting Cost Behavior

390(10)

Volume Index

391(1)

Cost Behaviors

391(6)

Cost-Volume-Profit Analysis

397(3)

Future Costs for Business Decisions

400(12)

Differential Cost and Revenue

400(4)

Opportunity Cost

404(2)

Sunk Costs

406(1)

Marginal Cost

406(6)

Estimating Profit from Production

412(16)

Calculation of Operating Income

412(1)

Sales Budget for a Manufacturing Business

412(1)

Preparing the Production Budget

413(2)

Preparing the Cost-of-Goods-Sold Budget

415(1)

Preparing the Nonmanufacturing Cost Budget

416(2)

Putting It All Together: The Budgeted Income Statement

418(2)

Looking Ahead

420(1)

Summary

420(1)

Problems

421(4)

Short Case Studies

425(3)

Depreciation and Corporate Taxes

428(60)

Asset Depreciation

430(2)

Economic Depreciation

431(1)

Accounting Depreciation

432(1)

Factors Inherent in Asset Depreciation

432(4)

Depreciable Property

432(1)

Cost Basis

433(2)

Useful Life and Salvage Value

435(1)

Depreciation Methods: Book and Tax Depreciation

436(1)

Book Depreciation Methods

436(9)

Straight-Line Method

437(1)

Accelerated Methods

438(6)

Units-of-Production Method

444(1)

Tax Depreciation Methods

445(6)

MACRS Depreciation

445(2)

MACRS Depreciation Rules

447(4)

Depletion

451(5)

Cost Depletion

451(2)

Percentage Depletion

453(3)

Repairs or Improvements Made to Depreciable Assets

456(2)

Revision of Book Depreciation

456(1)

Revision of Tax Depreciation

456(2)

Corporate Taxes

458(4)

Income Taxes on Operating Income

458(4)

Tax Treatment of Gains or Losses on Depreciable Assets

462(5)

Disposal of a MACRS Property

462(1)

Calculations of Gains and Losses on MACRS Property

463(4)

Income Tax Rate to Be Used in Economic Analysis

467(5)

Incremental Income Tax Rate

467(3)

Consideration of State Income Taxes

470(2)

The Need for Cash Flow in Engineering Economic Analysis

472(16)

Net Income versus Net Cash Flow

472(1)

Treatment of Noncash Expenses

473(3)

Summary

476(2)

Problems

478(8)

Short Case Studies

486(2)

Developing Project Cash Flows

488(51)

Cost—Benefit Estimation for Engineering Projects

490(2)

Simple Projects

490(1)

Complex Projects

491(1)

Incremental Cash Flows

492(4)

Elements of Cash Outflows

492(1)

Elements of Cash Inflows

493(1)

Classification of Cash Flow Elements

494(2)

Developing Cash Flow Statements

496(19)

When Projects Require Only Operating and Investing Activities

496(4)

When Projects Require Working-Capital Investments

500(5)

When Projects are Financed with Borrowed Funds

505(2)

When Projects Result in Negative Taxable Income

507(4)

When Projects Require Multiple Assets

511(4)

Generalized Cash-Flow Approach

515(24)

Setting up Net Cash-Flow Equations

515(4)

Presenting Cash Flows in Compact Tabular Formats

519(1)

Lease-or-Buy Decision

519(6)

Summary

525(1)

Problems

526(9)

Short Case Studies

535(4)

PART 4 HANDLING RISK AND UNCERTAINTY

539(188)

Inflation and Its Impact on Project Cash Flows

540(42)

Meaning and Measure of Inflation

543(7)

Measuring Inflation

543(5)

Actual versus Constant Dollars

548(2)

Equivalence Calculations under Inflation

550(6)

Market and Inflation-Free Interest Rates

551(1)

Constant-Dollar Analysis

551(1)

Actual-Dollar Analysis

552(4)

Mixed-Dollar Analysis

556(1)

Effects of Inflation on Project Cash Flows

556(9)

Multiple Inflation Rates

560(2)

Effects of Borrowed Funds Under Inflation

562(3)

Rate-of-Return Analysis Under Inflation

565(17)

Effects of Inflation on Return on Investment

565(4)

Effects of Inflation on Working Capital

569(2)

Summary

571(2)

Problems

573(5)

Short Case Studies

578(4)

Project Risk and Uncertainty

582(84)

Origins of Project Risk

585(1)

Methods of Describing Project Risk

585(12)

Sensitivity Analysis

585(6)

Break-Even Analysis

591(4)

Scenario Analysis

595(2)

Probability Concepts for Investment Decisions

597(12)

Assessment of Probabilities

597(5)

Summary of Probabilistic Information

602(3)

Joint and Conditional Probabilities

605(2)

Covariance and Coefficient of Correlation

607(2)

Probability Distribution of NPW

609(15)

Procedure for Developing an NPW Distribution

609(5)

Aggregating Risk over Time

614(6)

Decision Rules for Comparing Mutually Exclusive Risky Alternatives

620(4)

Risk Simulation

624(16)

Computer Simulation

624(1)

Model Building

625(3)

Monte Carlo Sampling

628(6)

Simulation Output Analysis

634(2)

Risk Simulation with Oracle Crystal Ball

636(4)

Decision Trees and Sequential Investment Decisions

640(26)

Structuring a Decision-Tree Diagram

640(4)

Worth of Obtaining Additional Information

644(4)

Decision Making after Having Imperfect Information

648(5)

Summary

653(1)

Problems

654(9)

Short Case Studies

663(3)

Real-Options Analysis

666(61)

Risk Management: Financial Options

668(6)

Features of Financial Options

668(2)

Buy Call Options when You Expect the Price to Go Up

670(2)

Buy Put Options when You Expect the Price to Go Down

672(2)

Option Strategies

674(5)

Buying Calls to Reduce Capital That is at Risk

674(3)

Protective Puts as a Hedge

677(2)

Option Pricing

679(14)

Replicating-Portfolio Approach with a Call Option

679(4)

Risk-Free Financing Approach

683(1)

Risk-Neutral Probability Approach

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