Engineering Economics
Economic decision-making for engineers — time value of money, equivalence analysis, rate of return, benefit-cost analysis, depreciation, and inflation. One of the most heavily tested FE exam sections.
Prerequisites
Exam Relevance
FE Exams8 exams
University Exams1 exam
Module Breakdown
1.Time Value of Money
Understand why money today differs from money in the future. Compute compound interest, convert between nominal and effective rates, and evaluate uniform and gradient cash-flow series.
13 concepts covered
2.Present Worth & Annual Worth
Compare engineering alternatives using present worth, future worth, and annual worth methods. Evaluate capital recovery, capitalized cost, and perpetuities for mutually exclusive projects.
14 concepts covered
3.Rate of Return
Calculate internal rate of return for single projects and use incremental IRR to choose between alternatives. Understand when IRR and present worth criteria agree or diverge.
5 concepts covered
4.Benefit-Cost Analysis
Evaluate public and private projects using benefit-cost ratios, break-even analysis, payback periods, and life-cycle costing. Account for disbenefits and discounted cash flows.
7 concepts covered
5.Depreciation & Taxes
Apply straight-line, declining-balance, and MACRS depreciation methods. Track book value and salvage value over an asset's life and understand how depreciation affects after-tax analysis.
13 concepts covered
Reference Textbooks
- Blank & Tarquin — Engineering Economy
- Park — Contemporary Engineering Economics
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