FOREWORD

In the face of cut-throat competition of the present day, businesses the world over have become more and more technical. Alongside other professionals, engineers play a key role in running businesses successfully across the globe. They play an important role in decision-making both in the manufacturing and service industries. Most of these decisions are made primarily on the basis of economic factors and their assessment. It is often seen that decision-makers do not possess the required knowledge and skills related to engineering, and thus, they frequently call upon engineers to make technical-economic analyses and suggest recommendations. Engineering Economy is an important subject for aspiring as well as practicing engineers today, as the techniques and models thus adopted assist engineers and managers in making well-thought-out decisions. They can use the knowledge of this subject to analyse and draw conclusions as they work on projects of all kinds of complexities.

The success of engineering and business projects is usually measured in terms of financial efficiency. A project would be able to achieve maximum financial efficiency if it is properly planned and operated with respect to its technical, social and financial requirements. Since it is the engineers who can understand the technical requirements of a project, they can assimilate the technical details with their knowledge of engineering economy to make an effective economic analysis and arrive at a sound managerial decision.

The present volume, comprising 14 chapters, covers many such related issues pertaining to economic analysis of projects. Chapter 1 summarizes the basic principles of engineering economy and its applications. Chapter 2 describes the fundamental concepts of mathematics and engineering economics which will help readers to learn basic mathematical concepts for economic analysis. The roles of factors involved in economic analysis have been discussed at length in Chapter 3. Chapter 4 describes the key concept of value of money, on which economic analyses are based. Topics such as simple and compound interests, cash flow diagrams, determination of equivalent cash flow at different points in time, nominal and effective interest rates have also been explained here. Chapter 5 describes the basic methods that can be used by engineers to perform economy-studies. The methods that can be used for selecting the best alternative out of many have been well presented in Chapter 6. Chapter 7 describes the procedure to be followed to decide whether an organization should continue to use existing physical assets (such as machine) or if the asset should be replaced. The value of a physical asset depreciates, that is, diminishes with time; this concept of depreciation as well as the procedure for calculating depreciation costs have been described in Chapter 8. Chapter 9 describes different methods such as benefit-cost ratio for the economic evaluation of large public-sector projects. The concept of inflation and how it affects the worth of capital have been discussed in Chapter 10. Often organizations have to make decisions as to whether they should manufacture a component in-house or buy it from outside. This procedure of arriving at a make-or-buy-decision has been explained in Chapter 11. In Chapter 12, the focus is project management. Concepts such as CPM, PERT and project crashing have been described here to enable readers understand and apply these techniques for timely and economic completion of their projects. Chapter 13 presents a well-established technique—value engineering— adopted to reduce the cost of a product and increase its value. The success of an organization depends on how efficiently and effectively it can forecast the demand for its products. The last chapter of the book, Chapter 14, describes the underlying concepts, methods and models of forecasting. This book, therefore, highlights the principles and applications of economic analysis in a lucid manner, supported by a large number and wide range of engineering-oriented examples and end-of-chapter exercises. It covers the syllabi of undergraduate and postgraduate courses of major Indian and overseas universities. Special chapters such as Fundamentals of Mathematics and Engineering Economics, Elementary Economic Analysis, Project Management, Value Engineering, and Forecasting, covered in this book are rare to find in books of this kind, which makes this book distinct from existing books.

Writing a book requires in-depth subject knowledge, dedication, sincere effort, sacrifices, and teaching and research experience. As head of the institution, I am aware that the first author of this volume, Dr Zahid Akhtar Khan, Professor in Mechanical Engineering, Jamia Millia Islamia, New Delhi, has more than 20 years of teaching and research experience. He has taught in overseas universities such as the University Sains Malaysia, Malaysia, and the King Abdulaziz University, Jeddah, Kingdom of Saudi Arabia. Apart from teaching, he is actively involved in research and development activities. He has published more than 45 research papers in reputed national and international journals and over 20 papers in the proceedings of conferences held in India and abroad. In addition, he has also contributed chapters in three books related to mechanical engineering. VDM Verlag, a German publishing company, has published one of his monographs. Dr Khan has supervised several M.Tech. dissertations and B.Tech. projects. Presently he is supervising five Ph.D. and three M.Tech. students. He and his colleague Mr. Arshad Noor Siddiquee have been instrumental in developing quite a few laboratories, including Metrology Lab, in the department and in preparing proposals for financial grants. This year they have submitted a proposal for SAP (worth 75 lakh) to the University Grants Commission. They, along with their team of students, have filed patent with the Controller General of Patents, Design and Trademarks, Government of India, for the designing and development of a convertible wheel chair.

Dr Khan has been discharging his additional duties as coordinator for the training and placement of postgraduate students; member-sports committee of the faculty; in-charge—faculty magazine Tech Times; in-charge—Engineering workshop; member—result analysis committee; member—sub-purchase committee of the department; advisor—students of mechanical engineering; and tabulator— M.Tech. and B.Tech. results.

He has received international recognition—his biography has been published in Marqui's Who's Who in Science and Engineering, Tenth edition, 2008-09. He has received the International Scientist of the Year 2008 award given by the International Biographical Centre, Cambridge, UK. He is a member of the Emerald Literati Network, UK, and is also on the panel of reviewers of international journals.

Arshad Noor Siddiquee, the second author of this book, has graduated from Government Engineering College, Jabalpur. He completed his M.Tech. from the Indian Institute of Technology, Delhi, where he is currently pursuing this doctoral studies. He is presently working as an associate professor in the Department of Mechanical Engineering, Jamia Millia Islamia. He played a key role in the developmental phase of Glasgow University College in Oman during 1998-2001. He has had hands-on experience in the establishment and accreditation of technical institutions during his tenure at the All India Council for Technical Education (AICTE), New Delhi, in the capacity of an assistant director. Siddiquee has dexterously used his skills in making Faculty of Engineering and Technology profile for ranking evaluation of institutions and also in making proposals for petroleum engineering and aeronautical engineering programmes. He has contributed chapters on engineering subjects to three books of reputed publishers and over 15 research papers to international journals. He is on the panel of reviewers for Elsevier and Springer journals.

Dr Brajesh Kumar, the third author, has worked in the Department of Expenditure, Ministry of Finance, Government of India, and is currently serving as an associate professor at the National Institute of Financial Management (NIFM), Faridabad. His areas of interest are managerial economics, financial econometrics and computer applications in economics. He has published several books on managerial economics, and macro- and micro-economics. Dr Kumar is associated with various national and international organizations in different capacities; for instance, agro-expert, Federation of Indian Chambers of Commerce and Industry (FICCI); read group member, Centre for Trade and Development (CENTAD)) and programme coordinator, civil servants from North-East Cadre.

I am extremely pleased to find that despite their most sincere involvement, commitment and dedication to teaching and research, the authors have put in so much effort to write this extremely useful and timely book. This must have demanded of them time away from family, and great sacrifices, pains and compromises. I have learnt that the range and content of the book has received excellent appreciation from its reviewers. It is an interesting fact that the market review of the publisher revealed that no single title in India is so far available to fulfill students' requirements in engineering economy. I have no doubt that this is a definitive text on the subject; that it would meet the genuine needs of students, teachers, and practising engineers and managers alike. I congratulate the authors for accomplishing this challenging task and wish them every success.

Najeeb Jung, IAS
Vice-Chancellor
Jamia Millia Islamia