Engineering Economy by Matias Arreola is a foundational textbook widely utilized in the Philippines for undergraduate engineering courses and licensure examination preparation. First published in 1979, the book provides a comprehensive framework for applying economic principles, investment theories, and business practices to engineering problems involving cost. Arreola, a registered civil engineer in the Philippines and a professional engineer in Illinois, USA, designed the text to bridge the gap between technical design and financial feasibility, emphasizing the concept of obtaining maximum benefit at the least possible cost. Core Concepts and Methodology The textbook is structured to guide students through the mathematical techniques required for economic comparisons. It covers essential topics such as: Money-Time Relationships : Detailed explanations of simple and compound interest, nominal and effective rates, and continuous compounding. Annuities and Capitalized Cost : Formulas and derivations for ordinary annuities, deferred annuities, annuity due, and perpetuities. Depreciation and Depletion : Coverage of various methods including straight-line, sinking fund, Sum-of-the-Years-Digits (SYD), and the Matheson formula. Investment Evaluation : Methods for making economy studies, such as Present Worth, Annual Worth, and Rate of Return (ROR) analysis. Educational and Professional Significance Arreola’s work is particularly noted for its practical application to the Philippine context, using local costs and prices as data for many of its problems. This makes it a primary resource for students preparing for the Professional Regulation Commission (PRC) board exams across various disciplines, including Civil, Mechanical, and Electrical Engineering. The book includes hundreds of illustrative problems and past board exam questions to serve as patterns for solution. Beyond engineering, the text is often used by students in management, accounting, and finance due to its concise treatment of capital investment and risk analysis. Detailed Table of Contents The Third Edition (1993) expanded the scope to include 20 chapters, covering both basic and advanced topics: The comprehensive 20-chapter structure (3rd Edition) covers essential topics including interest, annuities, depreciation, and corporate finance, with later chapters focusing on advanced topics like geometric gradients, and risk and uncertainty. Engineering Economy: A Prologue - O'Reilly
Book Review: Engineering Economy by Matias Arreola Title: Engineering Economy Author: Matias Arreola Subject: Engineering Economics, Financial Decision Making, Capital Budgeting Overview In the field of engineering, technical feasibility is only half the battle; financial viability is often the deciding factor. Matias Arreola’s Engineering Economy serves as a practical guide for engineering students and professionals who need to navigate the financial aspects of technical projects. The book is designed to bridge the gap between complex economic theories and the practical calculations engineers perform daily. Core Content and Structure Arreola structures the book logically, following the standard progression of engineering economy curricula. The text is generally divided into three major pillars:
The Time Value of Money: The book begins with the fundamental concept that money has different values over time. Arreola provides a thorough breakdown of interest formulas, cash flow diagrams, and the derivation of factors. The transition from simple interest to compound interest is handled with clarity, ensuring the reader grasps the mathematical foundation before moving to complex applications. Comparison of Alternatives: The heart of the text lies in its treatment of comparing mutually exclusive projects. Arreola covers the standard methods:
Present Worth (PW) and Future Worth (FW) Annual Worth (AW) Rate of Return (ROR) and Internal Rate of Return (IRR) Benefit-Cost Ratio Analysis The author excels in explaining the nuances of these methods, particularly the often-confusing "incremental analysis" required for ROR comparisons. engineering economy by matias arreola
Advanced Topics: Later chapters tackle depreciation, taxes, inflation, and replacement analysis. These sections are crucial for real-world application, moving the student from theoretical classroom problems to scenarios that mimic actual corporate financial planning.
Strengths
Local Context and Accessibility: One of the defining characteristics of Arreola’s work is its accessibility. Unlike heavier Western texts (such as Blank & Tarquin or Newman), Arreola often contextualizes problems in a way that resonates with students in the Philippine setting (depending on the specific edition used). This makes the material less abstract and more relatable for students in developing economies where infrastructure and capital budgeting constraints are specific. Simplicity of Approach: The book avoids over-complicating derivations. While it provides the necessary math, the focus remains on application . Arreola prioritizes the "how-to" over the dense economic theory, which is often preferred by engineering students who are more numerically inclined than theoretically inclined. Solved Examples: The text is rich in worked-out examples. Arreola does not just present a formula; he immediately applies it to a scenario. This step-by-step approach is invaluable for self-study and exam preparation. Engineering Economy by Matias Arreola is a foundational
Weaknesses
Visual Presentation: In earlier editions or print runs, the visual layout can be somewhat dense. Compared to modern international textbooks that utilize full-color diagrams and breakout boxes, Arreola’s text can appear text-heavy. This may intimidate students who are visual learners. Depth on Spreadsheet Integration: While modern engineering economy relies heavily on Excel and financial software, some editions of this text rely predominantly on manual calculation and factor tables. While manual calculation is vital for understanding the underlying logic, more robust integration with spreadsheet modeling would enhance the book's practical utility in the modern workplace. Advanced Risk Analysis: The book covers sensitivity analysis, but it is somewhat light on advanced probabilistic risk analysis (Monte Carlo simulations, etc.), which are becoming standard in high-level engineering finance.
Target Audience This book is primarily targeted at undergraduate engineering students (Civil, Mechanical, Electrical, Industrial) taking their mandatory Engineering Economy course. It is also a useful quick-reference for entry-level project engineers who need a refresher on depreciation or replacement cost calculations. Verdict Rating: 4.0 / 5.0 Stars Matias Arreola’s Engineering Economy is a solid, dependable, and pedagogically sound textbook. It strips away unnecessary economic jargon to focus on the tools engineers actually use: formulas, cash flow diagrams, and decision matrices. While it may lack the visual polish or advanced software integration of top-tier international publishers, it more than makes up for it with clear explanations and relevant problem sets. It is an excellent resource for students building their foundational knowledge in economic decision-making. Who should read this? Core Concepts and Methodology The textbook is structured
Engineering students struggling to understand the time value of money. Engineering board exam examinees looking for a concise review of economic formulas. Project managers seeking a refresher on cost-benefit analysis.
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