Is the design/device technically feasible? What does it cost/will it pay for itself? Practicing engineers are routinely faced with these crucially important questions. To answer the first question, engineers draw upon their technical skills, which have been carefully honed through courses in engineering science/design as well as by professional experience. The second question is often more difficult for engineers to answer affirmatively. This may be true because economic principles were addressed only as an afterthought in their engineering coursework, or possibly not at all! Those students who were fortunate enough to have taken a course in engineering economy have little difficulty answering the "Will it pay...?" question, which is frequently just as important a question as "Will it work?" This statement strikes many engineering students as unbelievable; yet later on, their professional careers will be significantly affected by their ability to deal competently with the economic aspects of engineering.

This twelfth edition of Engineering Economy provides exciting insights and thought-provoking inquiries into the principles, concepts, and techniques of engineering economy. The primary audience for this text is undergraduate students in engineering. As in previous editions, the twelfth edition reflects current theory and practice in the file of engineering economy by way of comprehensive and lucid content. In this edition an attempt has been made to demonstrate how the analysis of alternatives and the ability to earn an adequate return on capital investments are related to the well-being of flourishing and profitable enterprises.

New Features in Engineering Economy, 12e:

• A new Chapter 15 dealing with multiattibuted decision making
• Expanded coverage of cost estimating in Chapter 7
• Economic principles of engineering design now included in Chapter 2
• A completely rewritten Chapter 9 on Replacement Analysis
• Internet Boxes, which direct students to additional information on the internet

The companion website has been updated. It can be found at this address:

www.prenhall.com/sullivan_engineering

For instructors, new Microsoft PowerPoint slides contain all the figures from the book, updated Excel spreadsheet templates, sample test questions, and an engineering economy tutorial that includes green engineering examples.

About Engineering Economy

Engineering economy—what is it, and why is it important? The initial reaction of many engineering students to these questions is "Money matters will be handled by someone else. It is not something I need to worry about." In reality, any engineering project must be not only physically realizable, but also economically affordable. For example, a child's tricycle could be built with an aluminum frame or a composite frame. Some may argue that because the composite frame will be stronger and lighter, it is a better choice. However, there is not much of a market for thousand dollar tricycles! One might suggest that this argument is ridiculously simplistic and that common sense would dictate choosing aluminum for the framing material. Although the scenario is an exaggeration, it reinforces the idea that the economic factors of a design weigh heavily in the design process, and that engineering economy is an integral part of that process, regardless of the engineering discipline. Engineering, without economy, makes no sense at all.

In broad terms, for an engineering design to be successful, it must be technically sound and produce benefits. These benefits must exceed the costs associated with the design in order for the design to enhance net value. The field of engineering economy is concerned with the systematic evaluation of the benefits and costs of projects involving engineering design and analysis. In other words, engineering economy quantifies the benefits and costs associated with engineering projects to determine whether they make (or save) enough money to warrant their capital investments. Thus, engineering economy requires the application of engineering design and analysis principles to provide goods and services that satisfy the consumer at an affordable cost. As we shall see, engineering economy is as relevant to the design engineer who considers material selection as it is to the chief executive officer who approves capital expenditures for new ventures.

History of the Book

The original Introduction to Engineering Economy, authored by Woods and DeGarmo, appeared in 1942. The extensive use of this text for the past 60 years has encouraged the authors to continue building on the original purpose of the boo—kto teach lucidly the principles of engineering economy. In this spirit, the twelfth edition of Engineering Economy has built upon the rich and time-tested teaching materials of earlier editions, and its publication makes it the second-oldest book on the market that deals exclusively with engineering economy.

Twelfth Edition of Engineering Economy

New or Enhanced Features to This Edition

• Design economics problems are expanded in Chapter 2. . Cost estimating has been clarified and given expanded coverage. . A number of new and updated end-of-chapter problems are included.
• A Web site devoted to electronic media to support an engineering economy course is fully operational (and maintained by Prentice Hall).
• Spreadsheet templates appear throughout the text.
• An extra supplement dealing with development and use of spreadsheets is available.
• An Instructor's Manual containing full solutions to all problems in the book is available.
• Suggestions for using "student portfolios" to facilitate the integrated learning of topics in engineering economy are presented in this Preface.
• "Economic value added" by an engineering project is explained in terms of an after-tax cash-flow analysis.
• The cost of equity and debt capital and the weighted average cost of capital and its relationship to rate of return concepts are explained.
• Replacement Analysis (Chapter 9) has been rewritten to clarify concepts and principles of this important topic.
• Chapter 15, which deals with multiattributed decision making, has been added.

Pedagogy of this Book

This book has two primary purposes: (1) to provide students with a sound understanding of the principles, basic concepts, and methodology of engineering economy; and (2) to help them develop proficiency with these methods and with the process for making rational decisions regarding situations they are likely to encounter in professional practice. Consequently, Engineering Economy is intended to serve as a text for classroom instruction and as a basic reference for use by practicing engineers in all specialty areas (e.g., chemical, civil, computer, electrical, industrial, and mechanical engineering). The book is also useful to persons engaged in the management of technical activities.

As a textbook, the twelfth edition is written principally for the first formal course in engineering economy. The contents of the book and the accompanying Instructor's Manual and Electronic Spreadsheets Supplement (both available from Prentice Hall) are organized for effective presentation and teaching of the subject matter. A three-credit-hour semester course should be able to cover the majority of topics in this edition, and there is sufficient depth and breadth to enable an instructor to arrange course content to suit individual needs. Representative syllabi for a three-credit and a two-credit semester course in engineering economy are provided in Table P-1. Moreover, because several advanced topics are included, this book can also be used for a second course in engineering economy.

Every chapter and the appendices have been revised and updated to reflect current trends and issues. Also, numerous exercises that involve open-ended problem statements and iterative problem-solving skills are included throughout the book. A large number of the 500+ end-of-chapter exercises are new, and many solved examples representing realistic problems that arise in various engineering disciplines are presented.

An engineering economy course may be classified, for Accreditation Board for Engineering and Technology (ABET) purposes, as part engineering science and part engineering design. It is generally advisable to develop and teach such a course at the upper division level. Here, an engineering economy course incorporates the accumulated knowledge students have acquired in other areas of the curriculum also dealing with iterative problem solving, open-ended exercises, creativity in formulating and evaluating feasible solutions to problems, and consideration of realistic constraints (economic, aesthetic, safety, etc.) in problem solving.

Internet Web Site Supplement

An engineering home page is accessible to instructors and students at:
http://www.prenhall.com/sullivan_engineering

This resource contains numerous teaching and learning aids, such as (1) sample Microsoft PowerPoint^® slides for selected chapters in the book; (2) sample test/exam questions; (3) an engineering economy tutorial that includes green engineering examples; (4) electronic spreadsheet templates authored by James A. Alloway Jr.; and (5) case studies developed by engineering students working in interdisciplinary teams.

Our engineering economy home page is an apt resource for transitioning the teaching of engineering economy into the twenty-first century. Now instructors and students can electronically draw upon the Internet to "cut" and "paste" the desired learning supplements to suit their individual needs and interests. We are positive that this feature of the twelfth edition will motivate the curiosity, imagination, and learning of your students in engineering economy.

Instructional Features

The Instructor's Manual is designed as a comprehensive aid in teaching the text material. Full solutions of all problems at the end of each chapter are presented. Several comprehensive examples (case studies) have been included in the twelfth edition. These fairly complex examples and problems provide the instructor with essential material for teaching both the first formal course and a second, more advanced course in engineering economy. They also integrate the principles, basic concepts, and methodologies that are needed by engineers in typical real-world situations, and also serve as a bridge from the classroom to professional practice.

Spreadsheet Supplement

A second supplement entitled Spreadsheet Modeling to Accompany Engineering Economy, Twelfth Edition is authored by James A. Alloway, Jr. Electronic spreadsheets are a mainstay in many undergraduate engineering economy courses; the spreadsheet supplement ensures that the twelfth edition of Engineering Economy will maintain its leadership position by providing basic templates for all major topics in the text. In addition, it provides a concise summary of formulas and key concepts, which students will find invaluable for review and quick reference.

The greatest advantage is that it is no longer necessary to enter the spreadsheets by hand. The templates can be downloaded and opened directly in Excel for Windows. Most other spreadsheet software packages provide conversion utilities to convert these files into their respective native formats. Users can then modify the basic templates for the specific problem at hand. As a bonus, advanced templates have also been developed for such techniques as Monte Carlo simulation, three-factor simultaneous sensitivity analysis, and integer linear programming.

Engineering Economy Portfolio

In many engineering economy courses, students are required to design, develop, and maintain an "Engineering Economy Portfolio." The purpose of the portfolio is to demonstrate and integrate knowledge of engineering economy beyond the required assignments and tests. This is usually an individual assignment. Professional presentation, clarity, brevity, and creativity are important criteria that will be used to evaluate portfolios. Students are asked to keep the audience (i.e., the grader) in mind when constructing their portfolios.

The portfolio should contain a variety of content. To get credit for content, students must display their knowledge. Simply collecting articles in a folder demonstrates very little. To get credit for collected articles, students should read them and write a brief summary. The summary could explain how the article is relevant to engineering economy, it could critique the article, or it could check or extend any economic calculations in the article. The portfolio should include both the summary and the article itself. Annotating the article by writing comments in the margin is also a good idea. Other suggestions for portfolio content follows (note that students are encouraged to be creative):

• Describe and set up or solve an engineering economy problem from your own discipline (e.g., electrical engineering or building construction).
• Choose a project or problem in society or at your university and apply engineering economic analysis to one or more proposed solutions.
• Develop proposed homework or test problems for engineering economy. Include the complete solution. Additionally, state which course objectives) this problem demonstrates (include text section).
• Reflect upon and write about your progress in the class. You might include a self-evaluation against the course objectives.
• Include a photo or graphic that illustrates some aspect of engineering economy. Include a caption that explains the relevance of the photo or graphic.
• Include completely worked out practice problems. Use a different color pen to show these were checked against the provided answers.
• Rework missed test problems, including an explanation of each mistake.

(The preceding list could reflect the relative value of the suggested items; that is, items at the top of the list are worth more than items at the bottom of the list.)

Develop an introductory section that explains the purpose and organization of the portfolio. A table of contents and clearly marked sections or headings are highly recommended. Cite the source (i.e., a complete bibliographic entry) of all material other than your own work. Remember, portfolios provide evidence that students know more about engineering economy than what is reflected in the assignments and exams. Focus on quality of evidence, not quantity.

WILLIAM G. SULLIVAN
ELM M. WICKS
JAMES T. LUXHOJ

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