A review of: “PROJECT MANAGEMENT IN MANUFACTURING AND HIGH TECHNOLOGY OPERATIONS” by Adedeji B. Badiru,John Wiley and Sons,Inc., New York, 1988, xxii + 319 pp., ISBN 0471-62892-1, List $44.95.

The conventional approach to considering working capital cash flows in capital budgeting is to omit them or include some ad hoc figures at the initiation and termination of the project. The authors argue for an endogenous system of estimating relevant working capital cash flows on a periodic basis. Otherwise, the present value of working capital cash flows is biased against the project's acceptance. Examples of calculating working capital cash flows as related to changes in annual sales are presented for three time patterns of sales and contrasted to the conventional method. An empirical study of the linear relationship of net working capital and sales revenue of 770 companies is reported, and an alternative cash flow model is offered thai includes working capilal cash flows.     

A review of: “APPLIED ECONOMIC ANALYSIS FOR TECHNOLOGISTS,ENGINEERS, AND MANAGERS ” BY MICHAEL S. BOWMAN Prentice-Hall,Inc., Upper Saddle River,New Jersey, 1999, xii + 561 pp., ISBN: 0-13-375932-6, List: $76.75.

In their recent paper Tang and Tang (2003 Tang, S. L. and Tang, H. J. 2003. The variable financial indicator IRR and the constant economic indicator NPV.. The Engineering Economist, Vol. 48(No. 1): pp. 69–78. [Taylor &; Francis Online] , [Google Scholar], pp. 69–78) revive a longstanding controversy—net present value (NPV) versus internal rate of return (IRR)—by characterizing the NPV as an economic indicator and the IRR as a financial one. The paper implies that this distinction justifies ranking financial alternatives by ranking their IRRs. In the current article, it is argued that the direct IRR ranking does not necessarily provide the same evaluation environment—and therefore a fair comparison—for each alternative involved, and that the incremental ranking approach is needed to remedy this shortcoming. The article also points out that Tang and Tang's numerical examples of simple projects with one sign change in their cash flow patterns do not address the problem of multiple IRRs, which consequently renders Tang and Tang's ranking approach dysfunctional. It is demonstrated that the concept of a true rate of return, substituting for the non-performing IRR and applied in conjunction with the incremental approach, provides an adequate tool for ranking mutually exclusive projects or a project's technical or financial alternatives.     

Review of: ‘THE ANALYTIC HIERARCHY PROCES’by Thomas L. Saaty,New York,McGraw-Hill,Inc., 1980, xiii + 287 pp., list $37.50*

Editor's Mote: In recent tines It has been recognized by academics and practitioners in the field of engineering economics of the necessity of an active, continuing research program. Such s program will provide improvements in the state-of-the-art along with development of the manpower required Co carry on the profession. In 1983, specific activities were initiated to increase the awareness of research activity within the profession and to identify those research areas of greateat need or promise

On August 24–29, 1984, the National Science Foundation sponsored the Research Planning Conference on Engineering Economics at Mountain Lake, Virginia. The following report describes this important meeting and the recommendations that resulted. Because of the importance of this meeting to the profession, this summary has been Included here. The proceedings resulting from this planning conference are available free of charge by contacting U. J. Fabrycky, Department of Industrial Engineering and Operations Research, Virginia Polytechnic Institute and State University, Blacksburg, Virginia 24061.     

A review of: “COST ESTIMATING”, Rodney Stewart,Second Edition,John Wiley and Sons,Inc., New York, 1991, xxi + 359pp., ISBN 0-471-85707-6. List $54.95

In a previous paper Khan and Fiorino analyzed four energy saving projects. They found that use of the Capital Asset Pricing model to account for risk implied that the projects’ required rates of return were less than the return on riskless assets. Effectively lie projects bad negative risk. These negatively with macro economic activity. The current paper has two objectives: (1) to show that cafes of negative risk are rare and unimportant, and (2) to show that the assumption of negative covariance between energy price and the level of economic activity is incorrect.