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12: Engineering Economics

  • Page ID
    143028
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    Engineering Economics
    Great engineering is not just about technical feasibility — it is about economic viability. Every design decision, material selection, and system architecture carries a financial footprint that dictates whether a project can successfully move from concept to reality.

    Learning Objectives

    By the end of this chapter, you will be able to:

    • Explain the role of engineering economics in balancing technical performance, safety, and project costs.

    • Analyze trade-offs, interest rates, and opportunity costs in personal and engineering financial decisions.

    • Calculate future worth using simple and compound interest across various compounding frequencies.

    • Determine the present worth of single payments and uniform annual cash flows using financial discounting formulas.

    • Calculate the break-even point for a product or system to determine cost recovery thresholds.

    • Evaluate project viability using Return on Investment (ROI) calculations and industry sector benchmarks.

    • 12.1: Is Economics Important?
      This page contrasts personal financial choices with engineering financial decisions, introducing engineering economics as the framework used to balance cost, safety, and technical performance when evaluating real-world solutions.
    • 12.2: Trade-offs
      This page uses a car purchase example to illustrate how financing, interest, and lost opportunity costs affect major spending decisions in both personal finance and engineering projects.
    • 12.3: The Time Value of Money - Future Worth
      This page explains the Time Value of Money, demonstrating how simple and compound interest work and comparing how different compounding frequencies impact total financial growth over time.
    • 12.4: Time Value of Money - Present Worth
      This page explains the concept and mathematical formulas of Present Worth (PV) in engineering economics, detailing how single future payments and uniform annual cash flows are discounted to present-day values to evaluate investments and project costs.
    • 12.5: Break Even Point
      This page defines the Break Even Point (BEP) in engineering economics and provides a mathematical model and step-by-step example to calculate when product sales fully recover initial investment costs.
    • 12.6: Return on Investment
      This page defines Return on Investment (ROI) in engineering economics, provides formulas and a worked example for calculating annual ROI, outlines industry sector benchmarks, and explains how ROI guides project evaluation.
    • 12.7: Summary
      This page lists core engineering economics concepts, summarizing financial decision-making frameworks, the Time Value of Money, interest compounding dynamics, Break-Even Point analysis, and Return on Investment metrics.


    12: Engineering Economics is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

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