ABSTRACT
This chapter provides a brief tutorial on engineering economics for planning. It reviews the major elements of cost. The chapter looks at the time value of money and future-cost discount methods. It also reviews cost-effectiveness concepts and methods. The total difference in PW is slightly more than 3% of the average PW value of the alternative. Considering the straightforward nature of complete analysis, and the high proportion of the various cost elements common to both alternatives, it is very unlikely that the analysis is in error by 3%. Often, it is useful to compare projects or plans on the basis of their levelized annual cost, even if their actual costs change greatly from one year to the next. Very often the lifetimes or periods of cost being considered for two or more options are not equivalent, and yet it is desired to compare their costs on a valid basis. Levelized lifetime cost is a good way to do so.
