Introduction To Engineering Economics: Module No. 1

BATAAN HEROES COLLEGE
Module No. 1
INTRODUCTION TO
ENGINEERING
ECONOMICS
ENGINEERING ECONOMICS
ENGR. RAMON CHRISTOPHER C. LUCAS

Department of Engineering and Architecture
Module 1: Introduction to Engineering Economics
ENGINEERING ECONOMICS/MODULE 1
ENGR. RAMON CHRISTOPHER C. LUCAS Page 0
This module discusses the basic concepts and principles of engineering

economics, the design process, and some present economic studies.
Objectives of the Module:

At the end of this module the students must be able to:
1. Understand the basic concepts and principles of engineering economics;
2. Get familiarized with the common terminologies in engineering economics;
and
3. Get to know the relationship between the engineering economic analysis
procedure and the engineering design process.
1.1 Definition of Terms

Engineering Economics - previously known as engineering economy, is a subset of
economics concerned with the use and application of economic principles in the analysis of
engineering decisions.
Utility - the power of a good or service to satisfy human needs.
Value - designate the worth that a person attaches to an object or service; a measure or
appraisal of utility in some medium of exchange.
Consumer goods - the goods and services that are consumed or used directly and satisfy
human wants.
Examples:
This Photo by Unknown Author is licensed under CC BY
Producer goods - the goods and services that satisfy human wants indirectly as a part of
the production or construction process.
Examples: factory equipment, industrial chemicals and materials, tools, ships, buses
This Photo by Unknown Author is licensed under CC BY-SA
Price – of a good or commodity is the amount of money or its equivalent which is given in
exchange for it.
Market – a place where sellers and buyers come

together.
Demand – the quantity of a certain commodity that is bought at a certain price at a given
place and time.
Supply – the quantity of a certain commodity that is offered for sale at a certain price at a
given place and time.
Law of Demand – the common relationship that a higher price leads to a lower quantity
demanded of a certain good or service and a lower price leads to a higher quantity
demanded, while all other variables are held constant. It states that “The demand for a
commodity varies inversely as the price of the commodity, though not proportionately”.
Image by Julie Bang © Investopedia 2019
Law of Supply – the common relationship that a higher price leads to a greater quantity
supplied and a lower price leads to a lower quantity supplied, while all other variables are
held constant. It states that “The supply of a commodity varies directly as the price of the
commodity, though not proportionately.”
Time Value of Money - explains the change in the amount of money over time for both
owned and borrowed funds.
Economic Equivalence - a combination of time value of money and interest rate that makes
different sums of money at different times have equal economic value.
Minimum Attractive Rate of Return (MARR) - a reasonable rate of return established for the
evaluation of an economic alternative.
Cash Flow - the flow of money into and out of a company, project, or activity.
Interest – the amount of money paid for the use of

borrowed capital.
Principal – the amount of money borrowed and on

which interest is charged.
Simple interest – the interest to be paid is directly proportional to the length of time the
amount or principal is borrowed.
Nominal rate of interest (i) – specifies the rate of interest and the number of interest
periods per year.
Effective rate of interest (ieff) – the actual rate of interest on the principal for one year.
First cost (P) - total initial cost (purchase, construction, setup, etc.).
Present amount or worth (P) - amount of money at the current time or a time denoted as
present.
Future amount or worth (F) - amount at some future date considering time value of money.
Book value (BV) - remaining capital investment in an asset after depreciation is accounted
for.
Breakeven point - quantity at which revenues and costs are equal, or two alternatives are
equivalent.
Depreciation - reduction in the value of assets using specific models and rules.
Depreciation rate - annual rate for

reducing the value of assets using different depreciation methods.
Discount – the difference between what its worth in the

future and its present worth.
Payback period - number of years to recover the initial investment and a stated rate of
return.
Rate of return (ROR) - compound interest rate on unpaid or unrecovered balances such that
the final amount results in a zero balance.
Salvage value (SV) - expected trade-in or market value when an asset is traded or disposed
of.
Life / Useful life - number of years or periods over which an alternative or asset will be
used.
Textbook content produced by OpenStax is licensed under a Creative Commons Attribution 4.0 International
License (CC BY 4.0).
1.2 Principles of Engineering Economics
What is Engineering Economics?

Engineering economics, previously known as engineering economy, is a subset of
economics concerned with the use and application of economic principles in the analysis of
engineering decisions.
Engineering economics involves the systematic evaluation of the economic merits of
proposed solutions to engineering problems.
For example, engineering economics can be applied to these situations:
 Choosing the best design for a high-efficiency gas furnace.
 Selecting the most suitable robot for a welding operation on an automotive
assembly line.
 Making a recommendation about whether jet airplanes for an overnight delivery
service should be purchased or leased.
 Considering the choice between reusable and disposable bottles for high-demand
beverages.
To be economically acceptable (i.e., affordable), solutions to engineering problems must
demonstrate a positive balance of long- term benefits over long-term costs, and they must also
a. promote the well-being and survival of an organization;
b. embody creative and innovative technology and ideas; and
c. permit identification and scrutiny of their estimated outcomes.
Why do we study Engineering Economics?

Many reasons may be advanced why engineering economics should be studied. Among
these are:
 Engineers, as a group, have wrought immense changes in improving the economic
well-being of mankind through their inventions and their applications of scientific
principles to the varied problems of the industry.
 In the professional life of engineers, it is readily observed that the most successful
ones are those who gradually divorce themselves from the technical aspects of
engineering and who devote their time and efforts to financial problems related to
engineering work.
The foundation of Engineering economics can be discussed in terms of seven principles:
1. Develop the Alternatives.
2. Focus on the Differences.
3. Use a Consistent Viewpoint.
4. Use a Common Unit of Measure.
5. Consider All Relevant Criteria.
6. Make Uncertainty Explicit.
7. Revisit Your Decisions.
1. DEVELOP THE ALTERNATIVES.
Carefully define the problem, then the choice or decision is among alternatives. The
alternatives are needed to be identified and then defined for subsequent analysis.
A decision situation involves making a choice among two or more alternatives.
Creativity and innovation are essential to the process.
Example: The oil company must install antipollution equipment in a new refinery to meet federal
clean-air standards. Four design alternatives are considered.
2. FOCUS ON THE DIFFERENCES.

Only the differences in expected future outcomes among the alternatives are relevant to
their comparison and should be considered in the decision.
Outcomes that are common to all alternatives can be disregarded in the comparison and
decision.
Example: The outcomes of the four design alternatives have different capital investment and
annual expenses (i.e., power, labor, maintenance, and insurance).
3. USE A CONSISTENT VIEWPOINT.

The prospective outcomes of the alternatives, economic and other, should be consistently
developed from a defined viewpoint or perspective.
The perspective of the decision maker, which is often that of the owners of the firm,
would normally be used. The viewpoint for the particular decision be first defined and then used
consistently in the description, analysis, and comparison of the alternatives.
Example: The viewpoint of the oil company (the owner of the refinery who will pay the cost)
should be considered in generating the alternatives.
4. USE A COMMON UNIT OF MEASURE.

Using a common unit of measurement to enumerate as many of the prospective outcomes
as possible will make easier the analysis and comparison of alternatives. You should also try to
translate other outcomes (which do not initially appear to be economic) into the monetary unit.
Using more than one monetary unit for Economic Analysis will complicate the overall analysis
of a project.
Example: The outcomes of the four designs are measured in US Dollars. For instance, capital
investment for design A costs US $1,000,000, design B costs US $1,500,000, etc.
5. CONSIDER ALL RELEVANT CRITERIA.

The decision maker will normally select the alternative that will best serve the long-term
interests of the owners of the organization. In engineering economic analysis, the primary
criterion relates to the long-term financial interests of the owners. Often, though, there are other
organizational objectives you would like to achieve with your decision, and these should be
considered and given weight in the selection of an alternative.
Example: In order to be economically acceptable, the selection criterion is “Cost”. In addition,
government satisfaction (not economics) is another important criterion.
6. MAKE UNCERTAINTY EXPLICIT.

Uncertainty is inherent in projecting (or estimating) the future outcomes of the
alternatives and should be recognized in their analysis and comparison. The magnitude and the
impact of future outcomes of any course of action are uncertain.
Example: The probability is high that today’s estimates of future cash receipts and expenses will
not be what eventually occurs.
7. REVISIT YOUR DECISIONS.

A good decision-making process can result in a decision that has an undesirable outcome.
Other decisions, even though relatively successful, will have results significantly different from
the initial estimates of the consequences. Learning from and adapting based on our experience
are essential and are indicators of a good organization.
1.3 Engineering Economics and the Design Process

An engineering economic study is accomplished using a structured procedure and
mathematical modeling techniques. The economic results are then used in a decision situation
that involves two or more alternatives and normally includes other engineering knowledge and
input.
Table 1-1: The General Relationship Between Engineering Economic Analysis Procedure and the Engineering Design Process
The seven-step procedure is used to assist decision making within the engineering design
process, shown as the right-hand column in Table 1-1. In this case, activities in the design
process contribute information to related steps in the economic analysis procedure. The general
relationship between the activities in the design process and the steps of the economic analysis
procedure is indicated in Table 1-1.
Figure 1: Engineering Design Process
1. PROBLEM RECOGNITION, DEFINITION, AND EVALUATION

Problem must be well understood and stated in an explicit form before the project team
proceeds with the rest of the analysis. Once the problem is recognized, its formulation should be
viewed from a system’s perspective. Evaluation of the problem includes refinement of needs and
requirements, and information from the evaluation phase may change the original formulation of
the problem.
2. DEVELOPMENT OF THE FEASIBLE ALTERNATIVES

The two primary actions in Step 2 of the procedure are:
1) searching for potential alternatives and
2) screening them to select a smaller group of feasible alternatives for detailed analysis.
The term feasible here means that each alternative selected for further analysis is
judged, based on preliminary evaluation, to meet or exceed the requirements
established for the situation.
3. DEVELOPMENT OF THE OUTCOMES AND CASH FLOWS FOR EACH

ALTERNATIVE
In this step, it uses the basic cash-flow approach employed in engineering economy. A
cash flow occurs when money is transferred from one organization or individual to another.
Thus, a cash flow represents the economic effects of an alternative in terms of money spent and
received.
In addition to the economic aspects of decision making, nonmonetary factors (attributes)
often play a significant role in the final recommendation. Examples of objectives other than
profit maximization or cost minimization that can be important to an organization include the
following:
 Meeting or exceeding customer expectations
 Safety to employees and to the public
 Improving employee satisfaction
 Maintaining production flexibility to meet changing demands
 Meeting or exceeding all environmental requirements
 Achieving good public relations or being an exemplary member of the community
4. SELECTION OF A CRITERION (OR CRITERIA)

The decision maker will normally select the alternative that will best serve the long-term
interests of the owners of the organization. It is also true that the economic decision criterion
should reflect a consistent and proper viewpoint (Principle 3) to be maintained throughout an
engineering economy study.
5. ANALYSIS AND COMPARISON OF THE ALTERNATIVES

Analysis of the economic aspects of an engineering problem is largely based on cash-
flow estimates, exchange rates, or inflation for the feasible alternatives selected for detailed
study.
6. SELECTION OF THE PREFERRED ALTERNATIVE

When the first five steps of the engineering economic analysis procedure have been done
properly, the preferred alternative is simply a result of the total effort.
7. PERFORMANCE MONITORING AND POST-EVALUATION OF RESULTS

This is accomplished during and after the time that the results achieved from the selected
alternative are collected. Monitoring project performance during its operational phase improves
the achievement of related goals and objectives and reduces the variability in desired results.
This is also the follow-up step to a previous analysis, comparing actual results achieved with the
previously estimated outcomes.
The aim is to learn how to do better analyses, and the feedback from postimplementation
evaluation is important to the continuing improvement of operations in any organization.
1.4 Application of the Engineering Economic

In this section, we will apply the principles and procedures we have discussed in the
previous sections with the given situations and examples.
Example No. 1. A large electric utility company has proposed building an ₱ 820 million
combined cycle, gas-powered plant to replace the electric generation capacity at one of its
coal-fired facilities. Develop three other alternatives for replacing this electric generation
capacity.
Solution:
There are numerous other options including a nuclear power plant, a 100% gas-fired plant.
Also, solar farms are becoming more cost competitive nowadays and other renewable sources
of energy like wind energy.
Example No. 2. The management team of Kahoy Inc. is under pressure to increase profitability
to get a much-needed loan from the bank to purchase a more modern pattern-cutting machine.
One proposed solution is to sell waste wood chips and shavings to a local charcoal
manufacturer instead of just throwing them as solid wastes.
a. Define the company’s problem. Next, reformulate the problem in a variety of creative
ways.
b. Develop at least one potential alternative for your reformulated problems in Part (a).
Solution:
a. Kahoy Inc.’s problem appears to be that revenues are not sufficient to cover all
operating costs and expenses. Several reformulations can be posed:
1. The problem is to increase revenues while reducing costs.
2. The problem is to maintain revenues while reducing costs.
3. The problem is an accounting system that provides distorted cost information.
4. The problem is that the new machine is really not needed and hence, there is no
need for a bank loan.
b. Based only on reformulation 1, an alternative is to sell wood chips and shavings as long
as increased revenue exceeds extra expenses. Another alternative is to discontinue the
manufacture of specialty items and concentrate on standardized, high volume products.
Yet another alternative is to tie-up with other small-scale industries in the area involved
in providing modern wood pattern-cutting services.
Example No. 3. During your first month as an employee at Greenfield Industries (a large drill-
bit manufacturer), you are asked to evaluate alternatives for producing a newly designed drill
bit on a turning machine. Your boss’ memorandum to you has practically no information
about what the alternatives are and what criteria should be used. The same task was posed to a
previous employee who could not finish the analysis, but she has given you the following
information: An old turning machine valued at $350,000 exists (in the warehouse) that can be
modified for the new drill bit. The in-house technicians have given an estimate of $40,000 to
modify this machine, and they assure you that they will have the machine ready before the
projected start date (although they have never done any modifications of this type). It is hoped
that the old turning machine will be able to meet production requirements at full capacity. An
outside company, McDonald Inc., made the machine seven years ago and can easily do the
same modifications for $60,000. The cooling system used for this machine is not
environmentally safe and would require some disposal costs. McDonald Inc. has offered to
build a new turning machine with more environmental safeguards and higher capacity for a
price of $450,000. McDonald Inc. has promised this machine before the startup date and is
willing to pay any late costs. Your company has $100,000 set aside for the start-up of the new
product line of drill bits.
For this situation,
a. Define the problem.
b. List key assumptions.
c. List alternatives facing Greenfield Industries.
d. Select a criterion for evaluation of alternatives.
e. Introduce risk into this situation.
f. Discuss how nonmonetary considerations may impact the selection.
Solution:
a. Problem: To find the least expensive method for setting up capacity to produce drill
bits.
b. Assumptions: The revenue per unit will be the same for either machine; startup costs are
negligible; breakdowns are not frequent; previous employee’s data are correct; drill bits
are manufactured the same way regardless of the alternative chosen; in-house
technicians can modify the old machine so its life span will match that of the new
machine; neither machine has any resale value; there is no union to lobby for inhouse
work; etc.
c. Alternatives: (1) Modify the old machine for producing the new drill bit (using in-house
technicians)
(2) Buy a new machine for $450,000
(3) Get McDonald Inc. to modify the machine
(4) Outsource the work to another company.
d. Criterion: Least cost in dollars for the anticipated production runs, given that quality and
delivery time are essentially unaffected (i.e., not compromised).
e. Risks: The old machine could be less reliable than a new one; the old machine could
cause environmental hazards; fixing the old machine in-house could prove to be
unsatisfactory; the old machine could be less safe than a new one; etc.
f. Non-monetary Considerations: Safety; environmental concerns; quality/reliability
differences; “flexibility” of a new machine; job security for in-house work; image to
outside companies by having a new technology (machine); etc.
1.5 Present Economic Study

Present economic studies involve the analysis of problems for manufacturing a product or
rendering a service based on present or immediate costs. It is employed when the alternatives to
be compared will provide the same result and the length of time involved in the study is
relatively short.
Present economic studies occur in the following situations:
1. Selection of materials
2. Selection of method
3. Selection of design
4. Site Selection
5. Comparison of proficiency of workers
6. Economy of tool and equipment maintenance
7. Economy of number of workers
Sample Problems:
1. A machine part to be machined may be made either from an alloy of aluminum or steel. There
is an order for 8000 units. Steel costs ₱ 38.00 per kilogram, while aluminum costs ₱ 87.00 per
kilogram. If steel is used, the steel per unit weighs 110 grams; for aluminum, 30 grams. When
steel is used, 50 units can be produced per hour; for aluminum, 80 units per hour with the aid
of a tool costing ₱ 6,400.00, which will be useless after the 8000 units are finished. The cost
of the machine and operator is P1,080.00 per hour. If all other costs are identical, determine
which material will be more economical.
Solution:
We need to determine which will cost cheaper, the use of steel or the use of aluminum.
Therefore, we need to determine first the cost per piece for both materials.
Steel Aluminum
ଵ ௞௚ ଵ ௞௚
Material cost ͳͳͲ݃ ଵ଴଴଴ ௚
᪖ ͵ ͺ ǤͲͲ ൌ᪖4.18 ͵ Ͳ݃ ᪖ ͺ ͹ǤͲͲ ൌ᪖2.61
ଵ଴଴଴ ௚
Labor and ൐ ଵǡ଴଼଴Ǥ଴଴ ൐ ଵǡ଴଼଴
଼ Ǥ଴଴
ൌ൐ 21.60 ൌ൐ 13.50
machine cost ହ଴ ଼଴
൐ ͸ͶͲǤͲͲ
Tool ൌ൐ ͲǤͲͺ
ͺ ͲͲͲ
Cost per piece ൐ ʹ ͷǤ͹ͺ ൐ ͳ͸Ǥͳͻ
Total cost of
8000 units ₱206,240.00 ₱129,520.00
∴ Aluminum is cheaper.
2. A company manufactures 1,000,000 units of a product yearly. A new design of the product
will reduce the materials cost by 12%, but will increase processing cost by 2%. If materials
cost is ₱120.00 per unit and processing will cost ₱40.00 per unit, how can the company afford
to pay for the preparation of the new design and making changes in equipment?
Solution:
The maximum amount the company should spend should not exceed the savings they will
make on the new design. So,
Net Savings on new design = decrease in materials cost – increase in processing cost
¿ [ ( 1,000,000units )( ₱ 120.00 )( 12 % ) ]−[ ( 1,000,000 )( ₱ 40.00 ) ( 2 % ) ]
Net Savings on new design = ₱13,600,000.00
Review Questions
1. Which of the following statements is incorrect?
a. Economic decisions are time invariant.
b. Time and risk are the most important factors in any investment evaluation.
c. For a large-scale engineering project. engineers must consider the impact of the project
on the company’s financial statements.
d. One of the primary roles of engineers is to make capital expenditure decisions.
2. Which of the following statements defines the discipline of engineering economics most
closely?
c. Economic decisions made by engineers.
d. Economic decisions related to financial assets.
e. Economic decisions primarily for real assets and service from engineering projects.
f. Any economic decision related to the time value of money.
3. In an analysis of the market for paint, an economist discovers the facts listed below. State
whether each of these changes will affect supply or demand.
a. There have recently been some important cost-saving inventions in the technology for
making paint.
b. Paint is lasting longer, so that property owners need not repaint as often.
c. Because of severe hailstorms, many people need to repaint now.
d. The hailstorms damaged several factories that make paint, forcing them to close down
for several months.
4. Assume that your employer is a manufacturing firm that produces several different
electronic consumer products. What are five nonmonetary factors (attributes) that may be
important when a significant change is considered in the design of the current bestselling
product?
5. The ore of a gold mine in the Mountain Province contains, on the average, 0.5 g of gold per
ton. The first method of processing costs ₱165,000.00 per ton and recovers 93% of the
gold, while the second method costs only ₱150,000.00 per ton and recovers 81% of the
gold. If gold can be sold at ₱850,000.00 per ton, which method is better and by how
much?
Answers to Review Questions

1. a
2. c
3. a. increase in supply
b. increase in demand
c. increase in demand
d. decrease in supply
4. a. Safety Reliability
b. Quality in terms of consumer expectations
c. Aesthetics
d. Patent considerations
5. The first method of processing is better by ₱36,000.00
Assessment
A. Application of Engineering Economic Analysis Procedure
1. Consider this situation faced by a first-semester senior in mechanical engineering who is
exhausted from extensive job interviewing and penniless from excessive partying. Mary’s
impulse is to accept immediately a highly attractive job offer to work in her brother’s
successful manufacturing company. She would then be able to relax for a year or two,
save some money, and then return to college to complete her senior year and graduate.
Mary is cautious about this impulsive desire, because it may lead to no college degree at
all.
a. Develop at least two formulations for Mary’s problem.
b. Identify feasible solutions for each problem formulation in (a).
2. A friend of yours bought a small apartment building for $100,000 in a college town. She
spent $10,000 of her own money for the building and obtained a mortgage from a local
bank for the remaining $90,000. The annual mortgage payment to the bank is $10,500.
Your friend also expects that annual maintenance on the building and grounds will be
$15,000. There are four apartments (two bedrooms each) in the building that can each be
rented for $360 per month. Refer to the seven-step procedure in Table 1-1 (left-hand side)
to answer these questions:
a. Does your friend have a problem? If so, what is it?
b. What are her alternatives? Identify at least three.
B. Present Economic Study
1. A manufacturer has a contract to produce 5000 units of a certain machine. The machine
can be made by highly-trained workmen working individually. The machine can also be
made by less-skilled workmen working together if they are given specialized equipment
and proper supervision. The highly-trained workmen are paid ₱200.00 per hour, and
each can produce one unit every 2 hours, on the average.
The specialized equipment can be placed in operation at an original cost of ₱600,000.00
and it will be worthless at the time all the 5000 units are manufactured. With this
equipment, four men paid ₱150.00 each per hour, and a foreman, paid ₱250.00 per hour,
can do the work. All the five men working together can finish one unit in 15 mins.
Determine the gain or loss fi the specialized equipment is used.
2. A diesel engine uses Type A filter and high-grade lubricating oil costing ₱50.00 per
liter. With this filter, the oil and the filter have to be changed every 500 hours of
operation, and 5 liters of oil have to be added every 100 hours. The filter costs
₱1,480.00 a piece. Eighty liters of oil fill the engine.
Another type, filter B, costing ₱1,200.00 may be used with a lower grade of oil costing
₱48.00 per liter. However, if this filter is used, the oil and the filter have to be changed
every 300 hours, and 10 liters are added after each 150 hours the engine is used. Which
type of filter and oil would you recommend?
References
Ahmad, Muhammad Khurshid. (2016, November 27). Introduction to Engineering Economy.
Slideshare. https://www.slideshare.net/khurshidahmad13/introduction-to-engineering-
economy-69567706
Arreola, Matias (1993). Engineering Economy – A Systematic Approach to Engineering
Economy (3rd ed.). Ken Incorporated.
Sta. Maria, Hipolito. (2007). Engineering Economy (3rd ed.). National Bookstore.
Chappelow, Jim. (2019, August 9). Law of Supply. Investopedia.
https://www.investopedia.com/terms/l/lawofsupply.asp
Chappelow, Jim. (2020, March 27). Law of Demand. Investopedia.
https://www.investopedia.com/terms/l/lawofdemand.asp
Sullivan, W. G., Wicks, E. M., Koelling, C. P. (2015). Engineering Economy (16 th ed.). Pearson
Higher Education, Inc.
https://openstax.org/details/books/principles-economics-2e
Manama, Ahmed. (n.d.). Engineering Economy – Chapter 1: Introduction to Engineering
Economy. http://site.iugaza.edu.ps/amanama/files/2014/10/Chapter-1-Introduction-to-
Engineering-Economy.pdf

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BATAAN HEROES COLLEGE

ENGR. RAMON CHRISTOPHER C. LUCAS

This module discusses the basic concepts and principles of engineering

Objectives of the Module:

1.1 Definition of Terms

Utility - the power of a good or service to satisfy human needs.

This Photo by Unknown Author is licensed under CC BY

This Photo by Unknown Author is licensed under CC BY-SA

Market – a place where sellers and buyers come

Image by Julie Bang © Investopedia 2019

Interest – the amount of money paid for the use of

Principal – the amount of money borrowed and on

Depreciation rate - annual rate for

Discount – the difference between what its worth in the

What is Engineering Economics?

Why do we study Engineering Economics?

2. FOCUS ON THE DIFFERENCES.

3. USE A CONSISTENT VIEWPOINT.

4. USE A COMMON UNIT OF MEASURE.

5. CONSIDER ALL RELEVANT CRITERIA.

6. MAKE UNCERTAINTY EXPLICIT.

7. REVISIT YOUR DECISIONS.

1.3 Engineering Economics and the Design Process

Figure 1: Engineering Design Process

1. PROBLEM RECOGNITION, DEFINITION, AND EVALUATION

2. DEVELOPMENT OF THE FEASIBLE ALTERNATIVES

3. DEVELOPMENT OF THE OUTCOMES AND CASH FLOWS FOR EACH

4. SELECTION OF A CRITERION (OR CRITERIA)

5. ANALYSIS AND COMPARISON OF THE ALTERNATIVES

6. SELECTION OF THE PREFERRED ALTERNATIVE

7. PERFORMANCE MONITORING AND POST-EVALUATION OF RESULTS

1.4 Application of the Engineering Economic

1.5 Present Economic Study

Answers to Review Questions

B. Present Economic Study

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