Welcome. These notes are designed to provide an easy-to-understand yet comprehensive presentation of the fundamental concepts of engineering economic analysis. This discipline is not simply a subfield of finance; it is a critical competency for the modern engineer, providing a structured and rational framework for making sound, justifiable decisions. Every day, engineers are faced with choices that have significant economic consequences. Whether it involves selecting the most economical motor size, choosing the best materials for a new building, or prioritizing which factory improvement projects to fund, the ability to properly analyze and solve economic problems is paramount.

Engineering economic analysis equips you with the tools to dissect complex situations, compare alternatives on a fair basis, and ultimately select the course of action that offers the most value. It is the bridge between technical design and financial reality, ensuring that the elegant solutions we devise are also economically viable.

Throughout these notes, we will cover the core principles of this field, beginning with the foundations of decision-making and cost analysis. We will then explore the central concept of the time value of money, which allows us to compare financial sums from different points in time. Building on this, we will master the primary methods for project evaluation—Present Worth, Annual Worth, and Rate of Return—before incorporating real-world complexities like depreciation, taxes, and inflation. Finally, we will examine advanced and specialized applications, including replacement analysis and capital budgeting. By the end of this course, you will be equipped to make better, more defensible economic decisions in your professional and personal life.