Fields of civil engineering, involves construction of big projects with huge investment which directly related to the economy of the society. There occur a lot of alternatives, selection of best alternative is always a very important task. So, decision   making  is always challenging and touch. Analysis of each alternatives by considering all relevant criteria, technically economically (initial cost, future saving) is must necessary civil. engineers can play vital role in decision making to evaluate the condition, feasibility an appropriateness of an alternatives of a given project, estimate its value and justify it from an engineering stand points and finally discover the best alternative for implementation. for this knowledge about both in the field of civil engineering and engineering economics is necessary which clearly shows the important of engineering economics to civil engineers.

Fields of civil engineering, involves construction of big projects with huge investment which directly related to the economy of the society. There occur a lot of alternatives, selection of best alternative is always a very important task. So, decision   making  is always challenging and touch. Analysis of each alternatives by considering all relevant criteria, technically economically (initial cost, future saving) is must necessary civil. engineers can play vital role in decision making to evaluate the condition, feasibility an appropriateness of an alternatives of a given project, estimate its value and justify it from an engineering stand points and finally discover the best alternative for implementation. for this knowledge about both in the field of civil engineering and engineering economics is necessary which clearly shows the important of engineering economics to civil engineers.

There are three legal forms of business, each having certain advantages and disadvantages, as belows:

• proprietorship,
• partnerships, and
• corporations.

Proprietorship:

A proprietorship is a business owned by one individual. This person is responsible for the firmâ??s policies, owns all its assets, and is personally liable for its debts. A proprietorship has two major advantages. First, it can be formed easily and inexpensively. No legal and organizational requirements are associated with setting up a proprietorship, and organizational costs are therefore virtually nil. Second, the earnings of a proprietorship are taxed at the ownerâ??s personal tax rate, which may be lower than the rate at which corporate income is taxed. Apart from personal liability considerations, the major disadvantage of a proprietorship is that it cannot issue stocks and bonds, making it difficult to raise capital for any business expansion.

Partnerships

A partnership is similar to a proprietorship, except that it has more than one owner. Most partnerships are established by a written contract between the partners. The contract normally specifies salaries, contributions to capital, and the distribution of profits and losses. A partnership has many advantages, among which are its low cost and ease of formation. Because more than one person makes contributions, a partnership typically has a larger amount of capital available for business use. Since the personal assets of all  the partners stand behind the business, a partnership can borrow money more easily from a bank. Each partner pays only personal income tax on his or her share of a partnershipâ??s taxable income.

On the negative side, under partnership law each partner is liable for a businessâ??s debts. This means that the partners must risk all their personal assetsâ??even those not invested in the business. And while each partner is responsible for his or her portion of the debts in the event of bankruptcy, if any partners cannot meet their pro rata claims, the remaining partners must take over the unresolved claims. Finally, a partnership has a limited life, insofar as it must be dissolved and reorganized if one of the partners quits.

Corporation:

A corporation is a legal entity created under provincial or federal law. It is separate from its owners and managers. This separation gives the corporation four major advantages:

• It can raise capital from a large number of investors by issuing stocks and bonds;
• It permits easy transfer of ownership interest by trading shares of stock;
• It allows limited liabilityâ??personal liability is limited to the amount of the individualâ??s investment in the business; 
• It is taxed differently than proprietorship and partnerships, and under certain conditions, the tax laws favor corporations.

On the negative side, it is expensive to establish a corporation. Furthermore, a corporation is subject to numerous governmental requirements and regulations.

There are three legal forms of business, each having certain advantages and disadvantages, as belows:

• proprietorship,
• partnerships, and
• corporations.

Proprietorship:

A proprietorship is a business owned by one individual. This person is responsible for the firmâ??s policies, owns all its assets, and is personally liable for its debts. A proprietorship has two major advantages. First, it can be formed easily and inexpensively. No legal and organizational requirements are associated with setting up a proprietorship, and organizational costs are therefore virtually nil. Second, the earnings of a proprietorship are taxed at the ownerâ??s personal tax rate, which may be lower than the rate at which corporate income is taxed. Apart from personal liability considerations, the major disadvantage of a proprietorship is that it cannot issue stocks and bonds, making it difficult to raise capital for any business expansion.

Partnerships

A partnership is similar to a proprietorship, except that it has more than one owner. Most partnerships are established by a written contract between the partners. The contract normally specifies salaries, contributions to capital, and the distribution of profits and losses. A partnership has many advantages, among which are its low cost and ease of formation. Because more than one person makes contributions, a partnership typically has a larger amount of capital available for business use. Since the personal assets of all  the partners stand behind the business, a partnership can borrow money more easily from a bank. Each partner pays only personal income tax on his or her share of a partnershipâ??s taxable income.

On the negative side, under partnership law each partner is liable for a businessâ??s debts. This means that the partners must risk all their personal assetsâ??even those not invested in the business. And while each partner is responsible for his or her portion of the debts in the event of bankruptcy, if any partners cannot meet their pro rata claims, the remaining partners must take over the unresolved claims. Finally, a partnership has a limited life, insofar as it must be dissolved and reorganized if one of the partners quits.

Corporation:

A corporation is a legal entity created under provincial or federal law. It is separate from its owners and managers. This separation gives the corporation four major advantages:

• It can raise capital from a large number of investors by issuing stocks and bonds;
• It permits easy transfer of ownership interest by trading shares of stock;
• It allows limited liabilityâ??personal liability is limited to the amount of the individualâ??s investment in the business; 
• It is taxed differently than proprietorship and partnerships, and under certain conditions, the tax laws favor corporations.

On the negative side, it is expensive to establish a corporation. Furthermore, a corporation is subject to numerous governmental requirements and regulations.

Cash Flow is the statement which shows the inflows and outflows of cash and cash equivalents during the life of a project i.e, actual rupees coming into a firm or actual rupees going out from firm in different time periods. It is the basis for the evaluation of different alternatives.

The graphical representation of the cash flows streams i.e, both cash outflows and cash inflows with respect to a time scale is known as Cash flow diagram. It should show the following three things:

• A time interval divided into an appropriate number of equal periods.
• All cash out flows in each periods.
• All cash inflows for each period.

Unless otherwise specified, all such cash flows are considered to occur at the end of their respective periods.

Various steps involved in drawing a cash flow diagram are:

• In a cash flow diagram, the end of period `t` is the same as the beginning of period `t+1`.
• Beginning of period cash flows are rent, lease and insurance payments.
• End of period cash flows are O & M, salvages, revenues, overhauls.
• The choice of time zero is arbitrary. It can be when a project is analyzed, when funding is approved, or when construction begins.
• One persons cash outflow (represented as negative value) is another persons inflow (represented as a positive value).
• It is better to show two or more cash flows occurring in the same year individually so that there is a clear connection from problem statement to each cash flow in the diagram.
• Arrow lengths are approximately proportional to the magnitude of cash flow.

Cash Flow is the statement which shows the inflows and outflows of cash and cash equivalents during the life of a project i.e, actual rupees coming into a firm or actual rupees going out from firm in different time periods. It is the basis for the evaluation of different alternatives.

The graphical representation of the cash flows streams i.e, both cash outflows and cash inflows with respect to a time scale is known as Cash flow diagram. It should show the following three things:

• A time interval divided into an appropriate number of equal periods.
• All cash out flows in each periods.
• All cash inflows for each period.

Unless otherwise specified, all such cash flows are considered to occur at the end of their respective periods.

Various steps involved in drawing a cash flow diagram are:

• In a cash flow diagram, the end of period `t` is the same as the beginning of period `t+1`.
• Beginning of period cash flows are rent, lease and insurance payments.
• End of period cash flows are O & M, salvages, revenues, overhauls.
• The choice of time zero is arbitrary. It can be when a project is analyzed, when funding is approved, or when construction begins.
• One persons cash outflow (represented as negative value) is another persons inflow (represented as a positive value).
• It is better to show two or more cash flows occurring in the same year individually so that there is a clear connection from problem statement to each cash flow in the diagram.
• Arrow lengths are approximately proportional to the magnitude of cash flow.

Annuity:

An amount of money payable to a beneficiary at regular intervals for a prescribed period of time out of a fund reserved for that purpose is known as annuity. 

Assets:

An economic resource of entity (including money resources, physical resources, and intangible resources).

Break even point:

A point where the organization is in no gain and no loss states is called break even point. In business operation, the rate of operations output or sales at which income is equal to operation cost is known as break even point.

Capital:

The non-human ingredients that contribute to the production of good and services, including land, raw and semi finished materials, tools building machinery and inventories.

sunk cast

A sunk cost is a cost that an entity has incurred and which it can no longer recover by any means. sunk cost should not be considered when making the decision to continue investing is an ongoing project, since we cannot recover the cost sunk cost includes marketing study, research and development, training, hiring bonus.

opportunity cost

The cost of an alternative that must be forgone in order to pursue a certain action. It can also be defied as the value of benefits sacrificed in selecting a course of action among alternatives.

Marginal cost

The cost associated with one additional unit of production, also called the incremental cost.

Annuity:

An amount of money payable to a beneficiary at regular intervals for a prescribed period of time out of a fund reserved for that purpose is known as annuity. 

Assets:

An economic resource of entity (including money resources, physical resources, and intangible resources).

Break even point:

A point where the organization is in no gain and no loss states is called break even point. In business operation, the rate of operations output or sales at which income is equal to operation cost is known as break even point.

Capital:

The non-human ingredients that contribute to the production of good and services, including land, raw and semi finished materials, tools building machinery and inventories.

sunk cast

A sunk cost is a cost that an entity has incurred and which it can no longer recover by any means. sunk cost should not be considered when making the decision to continue investing is an ongoing project, since we cannot recover the cost sunk cost includes marketing study, research and development, training, hiring bonus.

opportunity cost

The cost of an alternative that must be forgone in order to pursue a certain action. It can also be defied as the value of benefits sacrificed in selecting a course of action among alternatives.

Marginal cost

The cost associated with one additional unit of production, also called the incremental cost.

The development  of engineering economy methodology, which is now used in all engineering work, is relatively resent. This does not mean that, historically, costs were usually overlooked in engineering decision. However, the perspective that ultimate economy is a concern to the engineer and the availability of sound techniques this aspect of modern engineering practice from that of the past.

• A pioneer in the field was ARTHUR M. wellington, a civil engineer, who in latter part of nineteenth century specifically addressed role of economic analysis in the engineering project. The main area of interest for him was railroad building, followed by other contributions which emphasized techniques depending on financial and actuarial mathematics.
• Later his work was followed by other Eugene  Grant who published the fast edition of his book which  was the milestone in the development of engineering economy.
• In 1942 Woods and Degarmo published the first edition of the book, later entitled engineering economy.

The development  of engineering economy methodology, which is now used in all engineering work, is relatively resent. This does not mean that, historically, costs were usually overlooked in engineering decision. However, the perspective that ultimate economy is a concern to the engineer and the availability of sound techniques this aspect of modern engineering practice from that of the past.

• A pioneer in the field was ARTHUR M. wellington, a civil engineer, who in latter part of nineteenth century specifically addressed role of economic analysis in the engineering project. The main area of interest for him was railroad building, followed by other contributions which emphasized techniques depending on financial and actuarial mathematics.
• Later his work was followed by other Eugene  Grant who published the fast edition of his book which  was the milestone in the development of engineering economy.
• In 1942 Woods and Degarmo published the first edition of the book, later entitled engineering economy.

The techniques and models of engineering economy assists people in making decisions. The role of engineers in the decision making is to evaluate the condition , feasibility and appropriateness of an alternatives of  a given project, estimates its value and justify it from an engineering stand point and finally discover the best alternatives for implementation. For this,both the knowledge of civil engineering and engineering economics is necessary, which clearly shows the importance of engineering economics to civil engineer. 

Since decision affect what will be done, the time frame of engineering economy is primarily the future. Therefore, numbers used in an engineering economic analysis are best estimates of what is expected to occur. These estimates often involve the three essential elements: cash flow, time of occurrence and interest rate.  These estimates are about future, and will somewhat different than what actually occurs, primarily because of changing circumstances and unplanned for events. In other words, stochastic nature of estimate will likely make the observed value in the future differ from the estimate made now. Thus, sensitive analysis is to be  performed during the engineering economic study to determine how the decision might change based on varying estimate.

Some of the reasons to have knowledge of engineering economics for engineers in decision making process are: 

• Develop the alternatives
• Use a common unit of measure
• Use a consistent viewpoint
• Consider all relevant criteria
• Make uncertainty criteria
• Revisit the decision

Engineering economics can be used equally to analyze outcomes have met or not met a specified criterion, such as rate of return requirement. The various steps involved in the problem- solving approach i.e, decision making approach are (Roles of engineer in decision making): 

1. Understand the problem and define objectives
2. Collect relevant information
3. Define the feasible alternative solutions and make realistic estimates.
4. Identify the criteria for decision making using one or more attributes.
5. Evaluate each alternative, using sensitive analysis to enhance the evaluation.
6. Select the best alternative.
7. Implement the solution and monitor the results.

The techniques and models of engineering economy assists people in making decisions. The role of engineers in the decision making is to evaluate the condition , feasibility and appropriateness of an alternatives of  a given project, estimates its value and justify it from an engineering stand point and finally discover the best alternatives for implementation. For this,both the knowledge of civil engineering and engineering economics is necessary, which clearly shows the importance of engineering economics to civil engineer. 

Since decision affect what will be done, the time frame of engineering economy is primarily the future. Therefore, numbers used in an engineering economic analysis are best estimates of what is expected to occur. These estimates often involve the three essential elements: cash flow, time of occurrence and interest rate.  These estimates are about future, and will somewhat different than what actually occurs, primarily because of changing circumstances and unplanned for events. In other words, stochastic nature of estimate will likely make the observed value in the future differ from the estimate made now. Thus, sensitive analysis is to be  performed during the engineering economic study to determine how the decision might change based on varying estimate.

Some of the reasons to have knowledge of engineering economics for engineers in decision making process are: 

• Develop the alternatives
• Use a common unit of measure
• Use a consistent viewpoint
• Consider all relevant criteria
• Make uncertainty criteria
• Revisit the decision

Engineering economics can be used equally to analyze outcomes have met or not met a specified criterion, such as rate of return requirement. The various steps involved in the problem- solving approach i.e, decision making approach are (Roles of engineer in decision making): 

1. Understand the problem and define objectives
2. Collect relevant information
3. Define the feasible alternative solutions and make realistic estimates.
4. Identify the criteria for decision making using one or more attributes.
5. Evaluate each alternative, using sensitive analysis to enhance the evaluation.
6. Select the best alternative.
7. Implement the solution and monitor the results.

Engineering economics is defined as the application of economics techniques to the evaluation of design and engineering alternatives, the role of which is to assess the appropriateness of a given project, estimate its value and justify it from an engineering standpoint. Engineering economics deals with the methods that enable one to take economic decision towards minimizing the cost or maximizing benefits to business organization.

The principle of engineering economics can be highlighted in following seven points:

Principle 1- Develop the alternatives:

Principle 2: Focus on the Differences:

Principle 3: Use a consistent Viewpoint:

Principle 4 - Use a common unit of measure:

Principle 5 - Consider all relevant criteria:

Principle 6 - Make uncertainty Explicit:

Principle 7 - Revisit the Decision:

Engineering economics is defined as the application of economics techniques to the evaluation of design and engineering alternatives, the role of which is to assess the appropriateness of a given project, estimate its value and justify it from an engineering standpoint. Engineering economics deals with the methods that enable one to take economic decision towards minimizing the cost or maximizing benefits to business organization.

The principle of engineering economics can be highlighted in following seven points:

Principle 1- Develop the alternatives:

Principle 2: Focus on the Differences:

Principle 3: Use a consistent Viewpoint:

Principle 4 - Use a common unit of measure:

Principle 5 - Consider all relevant criteria:

Principle 6 - Make uncertainty Explicit:

Principle 7 - Revisit the Decision: