Engineering Economic Analysis

After Completing This Chapter...

The student should be able to:

·Defineequivalent uniform annual cost (EUAC)andequivalent uniform annual benefit~

(EUAB).'

·Resolve an engineering economic analysis probleminto its annual cash flow equivalent

·Conduct anannual worth analysisfor a single investment.

·Use EUAC and EUAB to compare alternativeswith equal, common multiple, or contin-

uous lives, or over some fixed study period.

·Develop and use spreadsheets to analyze loans for purposes of building an amortization

table, calculating interest versus principal, finding the balance due, and determining

whether to payoff a loan early.

QUESTIONSTO CONSIDER ~

1. Retailers frequently attract buyer interest by advertising low sale prices for print~rs,but
   they almost never mention the cost of the ink cartridges. In analyzing the likely cost of
   operating a printer over its useful lifetime, how much weight should the buyer give to
   the price of the printer itself, and how much to the cost of the ink cartridges?


2. King Camp Gillette, inventor of the safety razor, designed his product to work with a

specially crafted blade that did not need sharpening and could be disposed of after a few

uses. Gillette eventuallyannounced,to everyone's as~onishment,that he would be giving

'his razors away for free. Many people couldn't imagine how he could possibly make

money this way. In fact, Gillette revolutionized marketing, and his business revenue

soared. Can you explain why?.

3. Would Gillette's strategy work with a product such as, say, an automobile? Why or why
   not?

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