PART 1 UNDERSTANDING MONEY AND ITS MANAGEMENT 1 Chapter 1 Engineering Economic Decisions 2 1.1 The Rational Decision-Making Process 4 1.1.1 How Do We Make Typical Personal Decisions? 4 1.1.2 How Do We Approach an Engineering Design Problem? 7 1.1.3 What Makes Economic Decisions Different from Other Design Decisions? 9 1.2 The Engineer' s Role in Business 10 1.2.1 Making Capital-Expenditure Decisions 10 1.2.2 Large-Scale Engineering Economic Decisions 10 1.2.3 Impact of Engineering Projects on Financial Statements 12 1. 3 Types of Strategic Engineering Economic Decisions 13 1.3.1 New Products or Product Expansion 14 1.3.2 Equipment and Process Selection 14 1.3.3 Cost Reduction 15 1.3.4 Equipment Replacement 16 1.3.5 Service or Quality Improvement 16 1.4 Fundamental Principles in Engineering Economics 17 Summary 18 Self-Test Questions 19 Problems 19 Chapter 2 Time Value of Money 20 2.1 Interest: The Cost of Money 22 2.1.1 The Time Value of Money 22 2.1.2 Elements of Transactions.