ABSTRACT
This chapter discusses financial aspects that are of critical importance in most engineering endeavors. The basic procedures employed in economic analysis, considering the time value of money as well as the relevance of economic considerations in the design of thermal systems, are presented. Calculations of present and future worth of lumped amounts as well as of a series of uniform or increasing payments, for different frequencies of compounding the interest, are discussed. The effects of inflation, taxes, depreciation, and different schedules of payment on economic analysis are considered. Methods of raising capital, such as stocks and bonds, are outlined. Costs are very important in design and often form the basis for choosing between different options that are otherwise acceptable. Different methods for comparing costs are given and may be used to judge the superiority of one approach over another. Trade-offs often have to be made to balance the technical needs of the project against the financial ones. The economic analysis of the design could also indicate whether it is financially better to design a component of the system or to purchase it from a manufacturer. It could guide the modifications in existing systems by determining if the suggested changes are financially appropriate. The implementation of the final design is also very much dependent on the expenditures involved, funds available, and financial outlook of the market.
