This paper explains the role of engineering economy in ship design and discusses the relative virtues and shortcomings of the several measures of merit in current use. In particular, comparison is made of the two criteria most popular with U.S. business managers today: net present value and discounted cash flow rate of return or yield. Under some conditions, the required freight rate criterion may be preferable to either of those two. Valid criteria have characteristics of flat laxity. Therefore, finding an exactly optimal design is not as important as establishing the range of designs that promises close to the maximum level of profitability. Applying the different criteria to a typical speed-optimization study demonstrates that, when properly used, each valid criterion will indicate a design that is within the reasonable range indicated by the others. The effects of taxes as well as bank loans are covered in some detail, with illustrative examples from a feasibility study. These demonstrate that taxes have great influence in weighing the economic merit of new technologies but that bank loans do not. A brief discussion of inflation concludes that technical decisions need be little affected by expected changes in the value of the dollar.

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  • Accession Number: 00007471
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Dec 30 1974 12:00AM