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Engineering Economics

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Eng ineeri ng Economy
Third Edition

Leland T. Blank, P. E.
Department of Industrial Engineering Assistant Dean of Engineering Texas A & M University

Anthony J. Tarquin, P. E.
Department of Civil Engineering Assistant Dean of Engineering The University of Texas at EI Paso

McGraw-Hill Book Company
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Level One

1.5 Define and recognize in a problem statement the economy symbols P, F, A, n, and i. 1.6 Define cash flow, state what is meant by end-of-period convention, and construct a cash-flow diagram, given a …show more content…

Was the best route the safest, shortest, fastest, cheapest, most scenic, or what? Obviously, depending upon which criterion is used to identify the best, a different route might be selected each time! (Many arguments could have been avoided if the decision makers had simply stated the criteria they were using in determining the best). In economic analysis, dollars are generally used as the basis for comparison. Thus, when there are several ways of accomplishing a given objective, the method that has the lowest overall cost is usually selected. However, in most cases the alternatives involve intangible factors, such as the effect of a process change on employee morale, which cannot readily be expressed in terms of dollars. When the alternatives available have approximately the same equivalent cost, the nonquantifiable, or intangible, factors may be used as the basis for selecting the best alternative, For items of an alternative which can be quantified in terms of dollars, it is important to recognize the concept of the time value of money. It is often said that money makes money. The statement is indeed true, for if we elect to invest money today (for example, in a bank or savings and loan association), by tomorrow we will have accumulated more money than we had originally invested. This change in the amount of money over a given time period is called the time value of money; it is the most important concept in engineering economy. You should also

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