What is new?

Steps Taken to Streamline the Textbook

We decided streamlining the textbook by retaining the depth and level of rigor in CEE, while eliminating some less critical topics in each chapter. This resulted in reducing total chapter contents by four chapters in two steps. Such core topics as the time value of money, measures of investment worth, development of project cash flows, the relationship between risk and return are still discussed in great detail.

• First, we eliminated the three chapters on cost accounting, principles of investing, and capital budgeting. We address these issues in other parts of the textbook, but in less depth than was contained in the deleted chapters.
• Second, we consolidated the two chapters on depreciation and income taxes into one chapter, thus eliminating one more chapter. This consolidation produced some unexpected benefits-students understand the depreciation and income taxes in the context of project cash flow analysis, rather than a separate accounting chapter.
• Third, moving the inflation material from late in the textbook to the end of the equivalence chapters enables students to understand better the nature of inflation in the context of time value of money.
• Fourth, the project cash flow analysis chapter (Chapter 9) is significantly streamlined-it begins with the definitions and classifications of various cost elements that will be a part of project cash flow statement.Then, it presents the income tax rate to use in developing a project cash flow statement. It also presents the appropriate interest rate to use in after-tax economic analysis. Finally, it illustrates how to develop a project cash flow statement considering (1) operating activities, (2) investing activities, and (3) financing activities.
• Fifth, the handling project uncertainty chapter (Chapter 10) has been consolidated by introducing the risk-adjusted discount rate approach and investment strategies under uncertainty but dropping the decision-tree analysis.
• Finally, the chapter on Understanding Financial Statements has been moved to the end of the book as a capstone chapter, illustrating that a corporation does not make a large-scale investment decision on an engineering project based on just profitability alone. It considers both the financial impact on the bottom-line of business as well as the market value of the corporation.

FEE is significantly different from CEE, but most of the chapters will be familiar to users of CEE. Although we pruned some material and clarified, updated, and otherwise improved all the chapters, FEE should still be regarded as an alternative version of CEE.

Features of the Book

Although FEE is a streamlined version of CEE, we did retain all the pedagogical elements and supporting materials that helped make the CEE so successful. Some of the features are:

• Each chapter opens with a real economic decision describing how an individual decision maker or actual corporation has wrestled with the issues discussed in the chapter.These opening cases heighten students interest by pointing out the real-world relevance and applicability of what might otherwise seem to be dry, technical material.
• There are a large number of end-of-chapter problems and exam-type questions varying in level of difficulty thoroughly cover the various topics.
• Most chapters contain a Short Case Studies with Excel, enabling students to use Excel to answer a set of questions.These problems reinforce the concepts covered in the chapter and provide students with an opportunity to become more proficient with an electronic spreadsheet.