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Engineering Economy, 18th edition

Published by Pearson (June 13, 2024) © 2025

  • William G. Sullivan Virginia Polytechnic Institute and State University
  • Elin M Wicks Rutgers University
  • Joseph H. Wilck Bucknell University

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For courses in introductory engineering economics. 

Help future engineers learn to make smart economic choices 

Engineering Economy offers engineering students a solid background in the principles, basic concepts and methodology of engineering economy. Practical, realistic explanations and examples help students develop proficiency in the methods and processes for making rational decisions. 

The 18th Edition modernizes content throughout, with more examples of engineering applications; offers Case Studies in twice as many chapters as the previous edition, with all existing case studies updated; features new and revised end-of-chapter problems; and much more.

Hallmark features of this title

  • A brief basic review of simple accounting principles is included.
  • Cost estimating is emphasized throughout.
  • Real-world engineering economy analysis methodology helps students develop proficiency with the methodology and processes for making rational decisions in situations they are likely to encounter in professional practice.
  • Many spreadsheet models and examples integrated throughout include hand-worked and computer solutions with spreadsheets, allowing students to see both techniques side by side.
  • Online electronic spreadsheets provide approximately 50 basic templates for all major topics in the text and summarize formulas and key concepts.

New and updated features of this title

  • NEW / REVISED: Approximately 35% of the end-of-chapter problems are either new or refreshed from previous editions.
  • REVISED: Examples and problems in the book were rewritten with an emphasis on Diversity, Equity, and Inclusion.
  • NEW: A Case Study is added to Chapter 12 with an Excel® example that uses a Data Table to simulate the probabilistic risk of retirement investments.
  • REVISED: Existing Chapter Case Studies have been updated and revised.
  • REVISED: The number of chapters with Case Studies has been doubled. For example, there is now a Case Study in Chapter 11 for Breakeven and Sensitivity Analysis.
  • NEW: The procedure Value Engineering has been added to Chapter 2; this allows engineers to analyze products and services using economic value as the objective of the design process.

Features of Pearson+ eTextbook for the 18th Edition

  • Interactive FE review questions allow students to check their own understanding.

Features of MyLab Engineering for the 18th Edition

  • NEW: New videos have been added, featuring enhanced and broadened supplementary instructional videos alongside problem-solving videos.
    • The problem-solving videos provide students with step-by-step solution methods, and demonstrate both by-hand and spreadsheet solutions.
  • REVISED: The revised Study Plan gives students personalized recommendations, practice opportunities, and learning aids to help them stay on track.
    • FE Review questions are available in the Study Plan and mapped to their corresponding chapters to provide students the opportunity to prepare for the licensure exam.
    • The eText also has interactive FE review questions that allow students to check their own understanding.
  • Auto-graded Excel® Projects allow you to seamlessly integrate Excel content into your course without manually grading spreadsheets. Students simply download a spreadsheet, complete the project in Excel, and then upload that file back into MyLab Engineering, where they receive reports on their work that provide personalized, detailed feedback.

1. Introduction to Engineering Economy

  • 1.1 Introduction
  • 1.2 The Principles of Engineering Economy
  • 1.3 Engineering Economy and the Design Process
  • 1.4 Using Spreadsheets in Engineering Economy
  • 1.5 Try Your Skills
  • 1.6 Summary

2. Cost Concepts and Design Economics

  • 2.1 Cost Terminology
  • 2.2 The General Economic Environment
  • 2.3 Cost-Driven Design Optimization
  • 2.4 Present Economy Studies
  • 2.5 Case Study: The Economics of Daytime Running Lights
  • 2.6 Value Engineering
  • 2.7 In-Class Exercise
  • 2.8 Try Your Skills
  • 2.9 Summary

3. Cost-Estimation Techniques

  • 3.1 Introduction
  • 3.2 An Integrated Approach
  • 3.3 Selected Estimating Techniques (Models)
  • 3.4 Parametric Cost Estimating
  • 3.5 Case Study: Electric Vehicle Battery Recovery
  • 3.6 Electronic Spreadsheet Modeling: Learning Curve
  • 3.7 In-Class Exercise
  • 3.8 Try Your Skills
  • 3.9 Summary

4. The Time Value of Money

  • 4.1 Introduction
  • 4.2 Simple Interest
  • 4.3 Compound Interest
  • 4.4 The Concept of Equivalence
  • 4.5 Notation and Cash-Flow Diagrams and Tables
  • 4.6 Relating Present and Future Equivalent Values of Single Cash Flows
  • 4.7 Relating a Uniform Series (Annuity) to Its Present and Future Equivalent Values
  • 4.8 Summary of Interest Formulas and Relationships for Discrete Compounding
  • 4.9 Deferred Annuities (Uniform Series)
  • 4.10 Equivalence Calculations Involving Multiple Interest Formulas
  • 4.11 Uniform (Arithmetic) Gradient of Cash Flows
  • 4.12 Geometric Sequences of Cash Flows
  • 4.13 Interest Rates that Vary with Time
  • 4.14 Nominal and Effective Interest Rates
  • 4.15 Compounding More Often than Once per Year
  • 4.16 Interest Formulas for Continuous Compounding and Discrete Cash Flows
  • 4.17 Case Study: Understanding Economic Equivalence
  • 4.18 In-Class Exercise
  • 4.19 Try Your Skills
  • 4.20 Summary

5. Evaluating a Single Project

  • 5.1 Introduction
  • 5.2 Determining the Minimum Attractive Rate of Return (MARR)
  • 5.3 The Present Worth Method
  • 5.4 The Future Worth Method
  • 5.5 The Annual Worth Method
  • 5.6 The Internal Rate of Return Method
  • 5.7 The External Rate of Return Method
  • 5.8 The Payback (Payout) Period Method
  • 5.9 Case Study: Data Center Establishment Project
  • 5.10 Electronic Spreadsheet Modeling: Payback Period Method
  • 5.11 In-Class Exercise
  • 5.12 Try Your Skills
  • 5.13 Summary
  • Appendix 5-A The Multiple Rate of Return Problem with the IRR Method

6. Comparison and Selection among Alternatives

  • 6.1 Introduction
  • 6.2 Basic Concepts for Comparing Alternatives
  • 6.3 The Study (Analysis) Period
  • 6.4 Useful Lives Are Equal to the Study Period
  • 6.5 Useful Lives Are Unequal among the Alternatives
  • 6.6 Personal Finances
  • 6.7 Case Study: Ned and Larry’s Ice Cream Company
  • 6.8 Postevaluation of Results
  • 6.9 Project Postevaluation Spreadsheet Approach
  • 6.10 In-Class Exercise
  • 6.11 Try Your Skills
  • 6.12 Summary

7. Depreciation and Income Taxes

  • 7.1 Introduction
  • 7.2 Depreciation Concepts and Terminology
  • 7.3 The Classical (Historical) Depreciation Methods
  • 7.4 The Modified Accelerated Cost Recovery System
  • 7.5 A Comprehensive Depreciation Example
  • 7.6 Introduction to Income Taxes
  • 7.7 The Effective Corporate Income Tax Rate
  • 7.8 Gain (Loss) on the Disposal of an Asset
  • 7.9 General Procedure for Making After-Tax Economic Analyses
  • 7.10 Illustration of Computations of ATCFs
  • 7.11 Economic Value Added
  • 7.12 In-Class Exercise
  • 7.13 Try Your Skills
  • 7.14 Summary

8. Price Changes and Exchange Rates

  • 8.1 Introduction
  • 8.2 Terminology and Basic Concepts
  • 8.3 Fixed and Responsive Annuities
  • 8.4 Differential Price Changes
  • 8.5 Spreadsheet Application
  • 8.6 Global Exchange Rates and Purchasing Power Concepts
  • 8.7 Case Study: Selecting Electric Motors to Power an Assembly Line
  • 8.8 In-Class Exercise
  • 8.9 Try Your Skills
  • 8.10 Summary

9. Replacement Analysis

  • 9.1 Introduction
  • 9.2 Reasons for Replacement Analysis
  • 9.3 Factors that Must Be Considered in Replacement Studies
  • 9.4 Typical Replacement Problems
  • 9.5 Determining the Economic Life of a New Asset (Challenger)
  • 9.6 Determining the Economic Life of a Defender
  • 9.7 Comparisons in Which the Defender’s Useful Life Differs from that of the Challenger
  • 9.8 Retirement without Replacement (Abandonment)
  • 9.9 After-Tax Replacement Studies
  • 9.10 Case Study: Replacement of a Hospital’s Emergency Electrical Supply System
  • 9.11 In-Class Exercise
  • 9.12 Try Your Skills
  • 9.13 Summary

10. Evaluating Projects with the Benefit−Cost Ratio Method

  • 10.1 Introduction
  • 10.2 Perspective and Terminology for Analyzing Public Projects
  • 10.3 Self-Liquidating Projects
  • 10.4 Multiple-Purpose Projects
  • 10.5 Difficulties in Evaluating Public-Sector Projects
  • 10.6 What Interest Rate Should Be Used for Public Projects?
  • 10.7 The Benefit−Cost Ratio Method
  • 10.8 Evaluating Independent Projects by B−C Ratios
  • 10.9 Comparison of Mutually Exclusive Projects by B−C Ratios
  • 10.10 Case Study: Rural Broadband Internet Expansion
  • 10.11 Try Your Skills
  • 10.12 Summary

11. Breakeven and Sensitivity Analysis

  • 11.1 Introduction
  • 11.2 Breakeven Analysis
  • 11.3 Sensitivity Analysis
  • 11.4 Multiple Factor Sensitivity Analysis
  • 11.5 CASE STUDY: If You Build It, They Will Come
  • 11.6 Try Your Skills
  • 11.7 Summary

12. Probabilistic Risk Analysis

  • 12.1 Introduction
  • 12.2 Sources of Uncertainty
  • 12.3 The Distribution of Random Variables
  • 12.4 Evaluation of Projects with Discrete Random Variables
  • 12.5 Evaluation of Projects with Continuous Random Variables
  • 12.6 Evaluation of Risk and Uncertainty by Monte Carlo Simulation
  • 12.7 Performing Monte Carlo Simulation with a Computer
  • 12.8 Decision Trees
  • 12.9 Real Options Analysis
  • 12.10 CASE STUDY: Retirement Balance
  • 12.11 Summary

13. The Capital Budgeting Process

  • 13.1 Introduction
  • 13.2 Debt Capital
  • 13.3 Equity Capital
  • 13.4 The Weighted Average Cost of Capital (WACC)
  • 13.5 Project Selection
  • 13.6 Postmortem Review
  • 13.7 Budgeting of Capital Investments and Management Perspective
  • 13.8 Leasing Decisions
  • 13.9 Capital Allocation
  • 13.10 Summary

14. Decision Making Considering Multiattributes

  • 14.1 Introduction
  • 14.2 Examples of Multiattribute Decisions
  • 14.3 Choice of Attributes
  • 14.4 Selection of a Measurement Scale
  • 14.5 Dimensionality of the Problem
  • 14.6 Noncompensatory Models
  • 14.7 Compensatory Models
  • 14.8 Summary

Appendices

  • A. Accounting Fundamentals
  • B. Abbreviations and Notation
  • C. Interest and Annuity Tables for Discrete Compounding
  • D. Interest and Annuity Tables for Continuous Compounding
  • E. Standard Normal Distribution
  • F. Selected References
  • G. Solutions to Try Your Skills
  • H. Answers to Selected Problems

Index

About our authors

Dr. William G. Sullivan earned his PhD from the Georgia Institute of Technology in Industrial and Systems Engineering. In his more than 40 years of service to industry and the academy, he made enduring contributions to engineering economy education. A tireless lecturer, he taught engineering economy to more than 10,000 students at 5 major universities (Georgia Tech, University of Tennessee, North Carolina State University, Arizona State University and Virginia Tech). He also had extensive consulting experience with 25 firms in the US.  Dr. Sullivan's 5 textbooks in the field, including Engineering Economy, continue to contribute to the education of thousands of students.

Elin M. Wicks is the owner of Abacus Accounting LLC, an accounting and bookkeeping company focused on empowering small business owners to achieve financial success. She earned a BS and MS in Industrial Engineering from Rutgers University, where her masters research focused on a method of quantifying non-economic factors in monetary terms. During this time, she also developed software tools to assist Cosmair Inc. in improving scheduling and labor recording practices. She went on to earn her PhD in Industrial and Systems Engineering from Virginia Tech, focusing on the design of cellular manufacturing systems. She then joined the faculty of the University of Missouri, Columbia in the Industrial and Manufacturing Systems Department. After taking some time off to raise her children, she supplemented her education in the field of accounting and became the Senior Accountant of Glenn B. Cohen, CPA, an accounting and financial management firm. She has been an author of Engineering Economy since the publication of the 10th edition. 

Joseph Wilck is an analytics and operations faculty member at Bucknell University. Dr. Wilck received his PhD in Industrial Engineering and Operations Research from Pennsylvania State University, and an MS and BS in Industrial and Systems Engineering from Virginia Tech. He conducts research in applied optimization, data science, and analytics. Prior to joining Bucknell University, he was on faculty at William & Mary, United States Air Force Academy, East Carolina University, and the University of Tennessee. Dr. Wilck is a Program Evaluator for ABET and a licensed Professional Engineer in North Carolina. Dr. Wilck is an active member and Fellow of the American Society for Engineering Management and an active member of the Institute of Industrial and Systems Engineers, the Institute for Operations Research and the Management Sciences, and the American Society for Engineering Education.

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