cH aptErSEVEN  ThEEnv irOnmEnT      267 it is referred to as br azil’s “valley of death,” and it may be the most polluted place on Earth. It lies about an hour’s drive south of São Paulo, where the land suddenly drops 2,000 feet to a coastal plain. More than 100,000 people live in the valley, along with a variety of industrial plants that discharge thousands of tons of pollut- ants into the air every day. A reporter for National Geographic recalls that within an hour of his arrival in the valley, his chest began aching as the polluted air inflamed his bronchial tubes and restricted his breathing.101 The air in the valley is loaded with toxins—among them benzene, a known carcinogen. One in ten of the area’s factory workers has a low white-blood-cell count, a possible precur- sor to leukemia. Infant mortality is 10 percent higher here than in the region as a whole. Of the 40,000 urban residents in the valley municipality of Cubatão, nearly 13,000 suffer from respiratory disease. Few of the local inhabitants complain, however. For them, the fumes smell of jobs. They also distrust bids to buy their property by local industry, which wants to expand, as well as government efforts to relocate them to free homesites on a landfill. One young mother says, “Yes, the children are often ill and sometimes can barely breathe. We want to live in another place, but we cannot afford to.” A university professor of public health, Dr. Oswaldo Campos, views the dirty air in Cubatão simply as the result of economic priorities. “Some say it is the price of progress,” Campos comments, “but is it? Look who pays the price—the poor.”102 Maybe the poor do pay the price of pollution, but there are those who believe that they should have more of it. One of them is Lawrence Summers, former director of the National Economic Council and a past president of Harvard University. He has argued that the bank should encourage the migration of dirty, polluting industries to the poorer, less-developed coun- tries.103 Why? First, Summers reasons, the costs of health- impairing pollution depend on the earnings forgone from increased injury and death. So polluting should be done in the countries with the lowest costs—that is, with the lowest wages. “The economic logic behind dumping a load of toxic waste in the lowest-wage country,” he writes, “is impeccable.” Second, because pollution costs rise disproportionately as pollution increases, it makes sense to shift pollution from already dirty places such as Los Angeles to clean ones like the relatively underpopulated countries in Africa, whose air Summers describes as “vastly under-polluted.” Third, people value a clean environment more as their incomes rise. If other things are equal, costs fall if pollution moves from affluent places to less affluent places. Critics charge that Summers views the world through “the distorting prism of market economics” and that his ideas are “a recipe fo ...

1. cH aptErSEVEN ThEEnv irOnmEnT 267
it is referred to as br azil’s “valley of
death,” and it may be the most polluted place on Earth. It
lies about an hour’s drive south of São Paulo, where the
land suddenly drops 2,000 feet to a coastal plain. More
than 100,000 people live in the valley, along with a variety of
industrial plants that discharge thousands of tons of pollut-
ants into the air every day. A reporter for National Geographic
recalls that within an hour of his arrival in the valley, his chest
began aching as the polluted air inflamed his bronchial tubes
and restricted his breathing.101
The air in the valley is loaded with toxins—among them
benzene, a known carcinogen. One in ten of the area’s factory
workers has a low white-blood-cell count, a possible precur-
sor to leukemia. Infant mortality is 10 percent higher here
than in the region as a whole. Of the 40,000 urban residents
in the valley municipality of Cubatão, nearly 13,000 suffer
from respiratory disease.
Few of the local inhabitants complain, however. For them,
the fumes smell of jobs. They also distrust bids to buy their
property by local industry, which wants to expand, as well as
government efforts to relocate them to free homesites on a
landfill. One young mother says, “Yes, the children are often ill
and sometimes can barely breathe. We want to live in another
place, but we cannot afford to.”
A university professor of public health, Dr. Oswaldo
Campos, views the dirty air in Cubatão simply as the result of

2. economic priorities. “Some say it is the price of progress,”
Campos comments, “but is it? Look who pays the price—the
poor.”102
Maybe the poor do pay the price of pollution, but there are
those who believe that they should have more of it. One of
them is Lawrence Summers, former director of the National
Economic Council and a past president of Harvard University.
He has argued that the bank should encourage the migration of
dirty, polluting industries to the poorer, less-developed coun-
tries.103 Why? First, Summers reasons, the costs of health-
impairing pollution depend on the earnings forgone from
increased injury and death. So polluting should be done in the
countries with the lowest costs—that is, with the lowest
wages. “The economic logic behind dumping a load of toxic
waste in the lowest-wage country,” he writes, “is impeccable.”
Second, because pollution costs rise disproportionately as
pollution increases, it makes sense to shift pollution from
already dirty places such as Los Angeles to clean ones like
the relatively underpopulated countries in Africa, whose air
Summers describes as “vastly under-polluted.” Third, people
value a clean environment more as their incomes rise. If other
things are equal, costs fall if pollution moves from affluent
places to less affluent places.
Critics charge that Summers views the world through “the
distorting prism of market economics” and that his ideas are
“a recipe for ruin.” Not only do the critics want “greener”
development in the third world, but also they are outraged
by Summers’s assumption that the value of a life—or of
increases or decreases in life expectancy—can be measured
in terms of per capita income. This premise implies that an
American’s life is worth that of a hundred Kenyans and that
society should value an extra year of life for a middle-level

3. manager more than it values an extra year for a blue-collar,
production-line worker.
Some economists, however, believe that Summers’s
ideas are basically on the right track. They emphasize that
environmental policy always involves trade-offs and that
therefore we should seek a balance between costs and
C a se 7. 2
poverty and pollution
43075_ch07_ptg01_hr_239-275.indd 267 8/13/12 1:25 PM
268 pa rttHr EE businEssAnDsOCiE T Y
benefits. As a matter of fact, the greatest cause of misery in
the third world is poverty. If environmental controls slow
growth, then fewer people will be lifted out of poverty by eco-
nomic development. For this reason, they argue, the richer
countries should not impose their standards of environmental
protection on poorer nations.
But even if economic growth is the cure for poverty, other
economists now believe that sound environmental policy is
necessary for durable growth, or at least that growth and
environmental protection may not be incompatible. First,
environmental damage can undermine economic productiv-
ity, and the health effects of pollution on a country’s work-
force reduce output. Second, poverty itself is an important
cause of environmental damage because people living at
subsistence levels are unable to invest in environmental pro-
tection. Finally, if economic growth and development are
defined broadly enough, then enhanced environmental qual-

4. ity is part and parcel of the improvement in welfare that
development must bring. For example, 1 billion people in
developing countries lack access to clean water while 1.7
billion suffer from inadequate sanitation. Economic develop-
ment for them means improving their environment.
Still, rich and poor countries tend to have different envi-
ronmental agendas: Environmentalists in affluent nations
worry about protecting endangered species, preserving bio-
logical diversity, saving the ozone layer, and preventing
climate change, whereas their counterparts in poorer coun-
tries are more concerned with dirty air, dirty water, soil
erosion, and deforestation. However, global warming—here-
tofore of concern mostly to people in the developed world—
threatens to reverse the progress that the world’s poorest
nations are gradually making toward prosperity. Or so con-
cludes a 2007 U.N. study.104 It offers a detailed view of how
poor areas, especially near the equator, are extremely vulner-
able to the water shortages, droughts, flooding rains, and
severe storms that increasing concentrations of greenhouse
gases are projected to make more frequent, and the authors
call on rich countries to do more to curb emissions linked to
global warming and to help poorer nations leapfrog to energy
sources that pollute less than coal and oil.
update
According to a World Bank report, environmental conditions
have improved in Cubatão, where, thanks to state action and
an aroused population, pollution is no worse today than in
other medium-size industrial cities in Brazil. True, it’s no para-
dise, but some days you can see the sun, children are
healthier, and fish are returning to the river (though their
tissues are laced with toxic metals).105
d i s C u s s i o n Q u e s t i o n s

5. 1. What attitudes and values on the part of business and
others lead to the creation of areas like the “valley of
death”?
2. Should the third world have more pollution, as Lawrence
Summers argues? Assess his argument that dirty indus-
tries should move to poorer and less-polluted areas.
3. Some say, “Pollution is the price of progress.” Is this
assertion
correct? What is meant by “progress”? Who in fact pays the
price? Explain the moral and the economic issues raised by
the assertion. What are the connections between economic
progress and development, on the one hand, and pollution
controls and environmental protection, on the other?
4. Do human beings have a moral right to a livable environ-
ment? To a nonpolluted environment? It might be argued
that if people in the “valley of death” don’t complain and
don’t wish to move, then they accept the risks of living
there and the polluters are not violating their rights.
Assess this argument.
5. Assess the contention that people in the third world
should learn from the errors of the West and seek devel-
opment without pollution. Should there be uniform, global
environmental standards, or should pollution-control
standards be lower for less-developed countries?
6. Even though they will probably be hit hardest by it, poor
nations are less able than are rich countries to deal with
the consequences of global warming. As a result, do rich
nations owe to it to poorer nations to curb their own emis-
sions more than they otherwise would be inclined to do?
Do they have an obligation to provide poorer nations with,

6. or help them develop, greener industries and sources of
energy? Explain why or why not.
43075_ch07_ptg01_hr_239-275.indd 268 8/13/12 1:25 PM
Case Study:
Steel Bearing Manufacturing
Frederick Legaspi
Class ID: 32
CON E 430 Case Study
Professor Hossein Hemati
Summer 2016
Introduction
An existing manufacturer would create a new business to just
produce steel bearings.
Case Study
The manufacturer needs to know:
Which group of machines to use to maximize their EUAW?
On their choice, what would be the depreciation and book value
of its equipment through its useful lifespan?
The Federal income tax after the first year of starting their new
manufacturing business?

7. Cost ParametersEquipment AEquipment bInterest rate for 15
year loan7%7%Cost of a Machine$30,000$28,500Number of
Machines1717Cost of equipment$510,000$484,500Price per
Unit$40.00$40.00Units per year26,00025,000Annual
Benefit$1,040,000$1,000,000Cost of Maintenance /
yr$50,000$60,000Cost of Labor &
Material$650,000$650,000Useful life10 years15 yearsSalvage
Value$51,000$48,450
Equipment A or Equipment B
Calculate the Equivalent Uniform Annual Worth (EUAW)
EUAW = EUAB – EUAC
EUAB is the Equivalent Uniform Annual Benefits
EUAB = Annual Benefits + Salvage Value
Equipment A:
Salvage Value= $51,000(A/F,7%,10) = $51,000(.0724)=
$3692.40
EUABA= $1,040,000 + $3692.40 = $1,043,692.40
Equipment B:
Salvage Value = $48,450(A/F,7%,15)= $48,450(.0398)=
$1928.31
EUABB= $1,000,000 + $1928.31 = $1,001,928.31
Equipment A or Equipment B
Calculate EUAC (Equivalent Uniform Annual Cost)

8. EUAC = Cost of equipment + Annual cost of Labor & Material
Equipment A
Cost of Equipment = $510,000(A/P,7%,15) = $510,000(.1098)
=$55,998
EUACA= $55,998 + $650,000 + $50,000= $755,998.00
Equipment B
Cost of Equipment = $484,500(A/P,7%,15) = $484,500(.1098)
= $53,362.80
EUACB = $53,362.80 + $650,000 + $60,000 = $763,198.10
Equipment A or Equipment BEquipment A Equipment BAnnual
Benefits$1,040,000$1,000,000Salvage
Value$51,000$48,450EUAB$1,043,692.40$1,001,928.31Equipm
ent A Equipment BCost of Equipment$510,000$484,500Cost of
Maintenance/yr$50,000$60,000Cost of Labor &
Material$650,000$650,000EUAC$755,998.00$763,198.31EUA
W$287,694.40$238,730.21
Equipment A has the largest EUAW at $287,694.40
This makes Equipment A the choice of machines to use.
7
Depreciation and Book Value
Finding the depreciation and book value of the bearing
production, the Manufacturer will use the modified accelerated
cost recovery system (MACRS) depreciation
The equipment has a useful lifespan of 10 years. The MACRS
depreciation rates will be from the 10 year property class
t = year

9. MACRS, r = MACRS percentage rate
Cost Basis, B = the cost of the equipment
dt = depreciation deduction = rt * B
Σdt = total sum of the depreciation
BVt= Book Value = B - Σdt
MACRS Depreciation and Book ValueYear, tMACRS, rtCost
BasisdtΣdtBV=B-
Σdt110.00$510,000$51,000$51,000$459,000218.00$510,000$91
,800$142,800$367,200314.40$510,000$73,440$216,240$293,76
0411.52$510,000$58,752$274,992$235,00859.22$510,000$47,0
22$322,014$187,98667.37$510,000$37,587$359,601$150,39976
.55*$510,000$33,405$393,006$116,99486.55$510,000$33,405$
426,411$83,58996.56$510,000$33,456$459,867$50,133106.55$
510,000$33,456$493,272$16,728113.28$510,000$22,746$510,0
00$0100%$510,000
Federal Income Tax
Finding the federal income tax, the new business must pay after
the first year of business. The MACRS cumulative dt for the
first year will be depreciation.
The new business’s taxable income:
Taxable Income = Gross Income - Expenditures - Depreciation
= $1,040,000 - $700,000 - $51,000 =
$289,000
The new business’s taxable income
is between $100,000 - 335,000
Therefore tax rate is 39%
Federal Income Tax = 22,250 + 39%(289,000-100,000)
= $95,960

10. Conclusion
Through annual cost analysis, EUAW of Equipment A ,
$287,694.40 is higher than Equipment B, $238,730.21. This
should mean the new business should use Equipment A.
The MACRS depreciation and Book Value were calculated for
its 10 useful years.
The Federal Income tax were calculated through its MACRS
depreciation value after its first year of business. The taxable
income was calculated to $289,000 and the federal income taxes
were calculated to $95,960.
References
http://www.bocabearings.com/
http://www.zysbearing.com/bearing-manufacturing-machines/
Case Study: Plotter
Construction Engineering 430
Arlyn Abanes
Class Number: 1
Summer 2016

11. Case Study
Your company plotter has been having issues with receiving
files to print. The company manager suggested on buying a new
plotter because the cost of maintenance is adding up to $1500 a
year.
You are assigned to look for two new possible printers and
figure out which is the best solution for this problem.
Plotter’s CostPlotter 1Plotter 2Cost of the
Plotter$4496$4900Interest Rate9%9%Life Span9 years10
yearsSalvage Value$450$490Annual Maintenance
Saving$1500$1500
Salvage Value is the 10% of the cost of each plotter,
Plotter 1 Calculation
Calculate Equivalent Uniform Annual Benefit.
Find the Equivalent Uniform Annual Cost of plotter 1.

12. Plotter 2 Calculation
Calculate Equivalent Uniform Annual Benefit.
Find the Equivalent Uniform Annual Cost of plotter 2.
Benefit-Cost Ratio
Plotter 2 – Plotter 1
Recommended
Solution
Through using different Engineering Economy techniques,
Equality Uniform Annual (EUA) method and Benefit-Cost
Ratio, to narrow down and calculate which is the best
alternative solution.
The two alternative choices had close to similar data
information. The only differences were the prices and the life

13. span of the product. However, by using benefit-cost ratio
method it was possible to narrow down the best possible choice
for the company.
According to the criterion in table 9-1, due to the result of the
benefit-cost method being less than 1, which is -0.172, the
correct decision for the company is the cheaper version which is
plotter 1.
Annual Depreciation and Book ValueYear (t)MACRS (rt)Cost
BasisdtCumulativeBVt110.00%$4,496.00$449.60$449.60$4,046
.40218.00%$4,496.00$809.28$1,258.88$3,237.12314.40%$4,49
6.00$647.42$1,906.30$2,589.70411.52%$4,496.00$517.94$2,42
4.24$2,071.7659.22%$4,496.00$414.53$2,838.77$1,657.2367.3
7%$4,496.00$331.36$3,170.13$1,325.8776.55%$4,496.00$294.
49$3,464.62$1,031.3886.55%$4,496.00$294.49$3,759.11$736.8
996.56%$4,496.00$294.94$4,054.04$441.96
Using table 11-3 for the MACRS values
Compare Plotter 1 with old printer
The annual depreciation and book value calculation was an
extra comparison of the actual salvage value.
As shown, if the actual salvage value and the savings were
added together the total of the benefit from buying the new

14. printer would be $1941.96.
If the old printer was kept for 9 years, the summation of lost
will be $13,500.
Thus, buying a new plotter will be better due to the money
saved from maintenance and the possible salvage value.
Reference
http://www8.hp.com/us/en/large-format-printers/designjet-
printers/z5400.html
http://www.tigerdirect.com/applications/searchtools/item-
details.asp?EdpNo=1141278&SRCCODE=3WGOOGLEBASE&c
m_mmc_o=mH4CjC7BBTkwCjCV1-
CjCE&gclid=CJinvsmPss4CFQaSaQodecYH4Q
Newman, Donald. Engineering Economic Analysis. 12th
CON E 430 – Case Study Fall 2016
Case Study 25 Points due Hard Copy Power points or Word
Format: Wednesday 30th of November 11/30/2016 at the
beginning of the class, No Email or posting.
Late work will not be accepted
You will be required to apply information that you learn to the

15. Case Study Tasks
Recommend:
a) Select a Case-Study to cover 3-4 topics in your field of study
related process developments for Product design or
Application and implementation of it of capital equipment’s
selections.
Interest and Equivalence Economic; Present Worth and Annual
Cash Flow Analysis
Choosing the Best Alternative; Income Tax; Replacement
Analysis; Inflation and Price Change
Safety and Environmental Needs in the Public or Private
Sector.
b) See Posted Case-Study- Samples
c) Report format: Power points 8-10 pages or Typed
Word Report 6-8 pages
d) All Case Study Assignment due Wednesday 30th of
November 11/30/2016 at the beginning of the class
Select a Case Study to meet Course Learning Outcomes:
Application: Case Study: 25
Points
Proposal of Case Study; Explain the Issues or concerns and
report 5 points
Apply various Engineering Economy techniques (at least

16. 3methods) and10
Apply relevant formulas for financial analysis.Explain
engineering economy analysis in the Private or Public sector
Apply economic analysis in managerial decision and
recommendations 10
With alternatives and future risk factor
Optional Presentation: Extra 5 points
6-8 Pages of Power; Point Due November 30th; Wednesday with
hard copy and soft copy of your presentation.
Case Study evaluation Form
Area
Outstanding (9-10)
Good (7.5-9)
Fair (6-7.5)
Poor (below 6)
Facts
The detail and cope of the information incorporated into the
project demonstrates considerable familiarity.
The student could have provided greater detail and scope.
The student had some difficulty furnishing sufficient evidence.
The student failed to provide information that is accurate and
relevant to the project.
Analysis

17. Facts, key concepts and principles were presented in an orderly
fashion with logically sound conclusions.
The student’s presentation of facts, and principles was orderly;
with one erroneous inference.
Some of the facts, are presented in a disorderly fashion with
some erroneous inferences.
Presentation of facts, key concepts and principles is disorderly
and there are multiple errors in reasoning.
Synthesis
The student brought together ideas around to create a
meaningful, coherent essay.
The student brought together ideas, however, sufficient context
is lacking.
The essay contains satisfactory factual and conceptual content,
but is presented in a disjointed, “grocery list” fashion.
The student has failed to construct a coherent essay built around
an identifiable organizing theme or concept.
Vocabulary
/Rhetoric
The student has demonstrated vocabulary and variety in
expression superior to this grade level.
The student has demonstrated vocabulary and variety in
expression expected at this grade level.
The student has not demonstrated vocabulary or variety in
expression expected at this grade level.

18. The student has utilized a vocabulary with little or no range
and/or no variety in expression.
Mechanics and sentence structure
The student consistently uses correct grammar, syntax, spelling,
punctuation, and capitalization.
The student has an average of fewer than 3 errors per page in
grammar, syntax, spelling, punctuation, and capitalization.
The student has an average of 3 or 4 errors per page in
grammar, syntax, spelling, punctuation, and capitalization.
The student has an average of more than 4 errors per page in
grammar, syntax, spelling, punctuation, and capitalization.
Research (if applicable)
The student has used a wide variety of informative and relevant
sources.
The student has used a sufficient number of sources.
The student has provided sources but had difficulty integrating
them.
The student has failed to provide sufficient relevant sources for
this assignment.
Turnitin Originality

19. Less than 12%
12-15%
15-20%
20-25%
Course Objectives
· To Offer Framework for cost management in engineering
Projects.
· To offer assistance in managerial decision making
· To introduce fundamentals of Personal, Private and Public
sector financing Engineering Projects
· Apply Mathematics of finance to engineering and managerial
decision making.
· Introduce the fundamentals of economic analysis used in
engineering decision making.
· To introduce Economic Analysis of Replacement and
Retention Decisions
· To prepare students for PE/FE Examinations
Course Learning Outcomes:
This course is one of many that you will take towards your
degree in Civil, Construction or Environmental Engineering.
Each of our courses is designed as part of your career
development in your respective Engineering profession.
Program Outcomes are intended to provide a broad base of

20. knowledge to found your career. However, each course in the
curriculum emphasizes particular aspects of that overall body of
knowledge. Although other outcomes may also be addressed,
this course is intended to have a particular emphasis on the
following program outcomes
Outcome 9:Apply relevant techniques, skills and modern
engineering tools to solve a simple problem
Assessed by: Homework, Midterm and Final Exam
a) Formulate and solve time value of money problems
b) Apply various Engineering Economy techniques to compare
engineering alternatives.
Outcome 12:Explain key concepts and problem-solving
processes used in management
Assessed by: Homework
a) Apply results of economic analysis in managerial decision
making
b) Apply relevant formulas for financial analysis
Outcome 13:Explain key concepts and problem-solving
processes used in business, public policy and public
administration
Assessed by: Homework and Quizzes

21. a) Explain relevance of engineering economy analysis in the
private sector
b) Explain relevance of engineering economy analysis in the
public sector