A Review of: “ECONOMIC DECISION MODELS FOR ENGINEERS AND MANAGERS” By James L. Riggs McGraw-Hill Book Company 1968 pp.xvi,401 $11.50

This study breaks down the use of capital budgeting procedures between industries. While it is easy to state that the use of capital budgeting analysis has become more sophisticated over the decades, the question remains as to whether different industries have followed the same pattern. Three hundred two Fortune 1,000 companies responded to a survey organized along industry lines. Chi-square independence of classification tests indicated that a null hypothesis of no significant relationship between industry classification and capital budgeting procedures could be rejected in a number of decision-making areas including goal setting, rates of return, and portfolio considerations. Just as industry patterns affect financing decisions (debt vs. equity), they also affect capital budgeting decisions, and this study emphasizes that point.     

Review of: “ PLANT DESIGN AND ECONOMICS FOR CHEMICAL ENGINEERS ” MAX S. PETERS: McGraw-Hill Book Company,New York, 1958. 511 pp. $11.00

This paper presents a review, some explanations, and some comments on each of the two preceding articles on the above subject. The unit-summation procedure of calculating the depreciation of group properties by the straight-line depreciation method, which was referred to in Part I and Part II of this series, is introduced. Details of its procedure are compared and contrasted with the equal-life group plan in order to show the fundamental similarity between the two procedures, even though the basic premises are not quite the same.

The Szabo-Henter development, explained in Part II of the series and reviewed briefly in this paper, showed what the total accumulated recoupment of the cost of a vintage would be at any age if the forecast of the annual retirements is that they are constant. The equal-life group (unit-summation) procedure was utilized to demonstrate the appropriateness of the mathematics.

In conclusion, the contrasts between the vintage-group technique (often called the “average-life procedure”) and the equal-life group (unit-summation) procedure are amplified.