Applying Engineering Economics; A Spreadsheet Approach to Financial Evaluation of Capital Projects

Engineering Economy deals with evaluating the financial viability of capital projects. This process involves creating a cash flow which represents the changes in the system due to the capital project and the costs of the capital project over time. These cash flow elements are then analyzed at selected points in time by adjusting them to a common point in time based on the minimum attractive rate of return of the organization and the decision metric chosen for the analysis.

These techniques are covered in all engineering economy textbooks, but all current textbooks follow the traditional pedagogy of teaching formulae, applying these formulae (and the tabularized values for these equations), and only then using computerized spreadsheets to solve the same and similar problems; this method takes too long to master.

This book bypasses the tables & uses the speed of computers to present the concepts in a basic (and less mathematically elegant) use-oriented form, which allows practitioners (and future practitioners, e.g. students) to master engineering economic principles quickly and efficiently. This simplified approach creates the same understanding of the concepts and their application without the no-value-added step on understanding the tables, which are never used outside the classroom (except while taking the FE exam, and the new online FE should soon end that use).

The book is intended for practitioners, other than those in the finance department of an organization, who need to evaluate the financial viability of a capital project in order to make better decisions if the decision maker and/ or make better recommendations to decision makers if not. Understanding the process of determining financial viability allows those who propose, develop, and implement capital projects to develop capital projects of greater value to their organization, and better understand where to look for potential projects. Engineers, engineering technologists, and other technical professionals at the individual contributor level need these skills, and these skills are critical skills for these same individuals when they progress to leadership roles. This book will help these individuals develop and select more viable capital projects, without needing to wade through a much longer, expensive resource.