Contemporary Engineering Economics

Contemporary Engineering Economics

Humphrey, David

CONTEMPORARY ENGINEERING ECONOMICS By CHAN S. PARK Third Edition, Prentice Hall, Upper Saddle River, New Jersey, 2002, xxxi + 920 pp. ISBN 0-13-089310-2. List: $102.00.

In this third edition of Contemporary Engineering Economics, Chan Park has provided a nice text for an introductory course in engineering economics. Some reorganization has been done since the second edition and additional material has been added, and the net result of these changes is a more polished and clearly better third edition.

This text is divided into five parts, each of several chapters, as follows: Financial and Cost Information (Chapters 1 – 3); Money and Investing (Chapters 4 – 6); Evaluating Business and Engineering Assets (Chapters 7 – 9); Development of Project Cash Flows (Chapters 10 – 13); and Special Topics in Engineering Economics (Chapters 14 – 17). The seventeen chapters are titled: 1. Engineering Economic Decisions; 2. Understanding Financial Statements; 3. Cost Concepts and Behaviors; 4. Time is Money; 5. Understanding Money and Its Management; 6. Principles of Investing; 7. Present Worth Analysis; 8. Annual Equivalent Worth Analysis; 9. Rate of Return Analysis; 10. Depreciation; 11. Corporate Income Taxes; 12. Developing Project Cash Flows; 13. Inflation and Its Impact on Project Cash Flows; 14. Project Risk and Uncertainty; 15. Replacement Decisions; 16. Capital Budgeting Decisions; 17. Economic Analysis in the Public Sector. Finally, there are Appendices A – D; Answers to Self-Test Questions; and an Index. Chapters 2, 3, and 6 are new to the third edition.

The material presented in the new Chapter 2 is, in my opinion, an excellent addition to the text. A discussion is given on each of the following: the balance sheet, the income statement, the statement of cash flows, and the statement of retained earnings. I think just enough explanation is given at just the right level of detail for this to be meaningful and helpful to engineering students who lack the time or inclination to take a few business classes. Since this is clearly a four– part discussion on financial statements, I think that the statement of retained earnings should be in its own subsection along with the other three financial statements. I also think that using `statement of cash flows’ and `cash flow statement’ within this one chapter is a bit annoying, but neither of these objections significantly detracts from the content provided. The presentation of financial ratios also makes this new chapter a good addition to the text.

Chapter 5 has been reworked to include some new material, and this new material is a good addition to Park’s text. The new material gives the student a good overview of personal finance concepts related to credit cards, commercial loans, and home mortgages. I typically include some aspects of these topics in the introductory course I teach at North Carolina State University, and I find that the students respond very well to these topics when they are presented with clear real-world examples. For far too many students, this presentation on personal finance will be their first exposure to these important topics. While the presentation in Park’s text is not overly deep, it does remove a lot of mysteries surrounding the subject matter, and it shows the direct connection to engineering economy and the time-value of money.

I especially like the addition of the new Chapter 6: Principles of Investing. I think these topics represent some of the best and most practical applications of engineering economy for the students who will be utilizing this text. The present generation of undergraduates is well aware (or should be) that they will be primarily responsible for funding their own retirement. The Chapter 6 topics provide a clear view of how the power of compounding can make a well-funded retirement possible and show the student that useful tools for planning and analysis are a part of this course. For many students, these few topics will be their best and longest-lasting connection to engineering economy after departing the undergraduate course associated with this text.

Other bits of fine-tuning have been done to this new edition of the text. The book’s related end-of-chapter `Computer Notes’ have mercifully been relegated to the publisher’s website. The website contains an array of material related to the text for the eager student who takes time to go in search of broader horizons. The website also contains several additional pages with scores of links to a wide variety of sites with some reasonable connection to the world of engineering economics, including The Wall Street Journal, Internal Revenue Service (IRS), and The Motley Fool. Some of the links to the IRS Publications yielded the infamous `Error 404′, but I am confident those links will be updated and functional again soon. There are multiple-choice self-test questions at the end of each chapter (with answers at the end of the book) along with a nice collection of homework problems.

Professor Park is to be congratulated for this fine addition to the wide array of introductory texts in the area of engineering economics. This well organized text is nicely written, and the newly added material complements the reorganized material carried over from the second edition. Contemporary Engineering Economics, Third Edition, by Chan Park will be rewarding for students and faculty for years to come.

Copyright Institute of Industrial Engineers 2002

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