Ten Principles of Engineering Economic Analysis

1. Money has a time value.
2. Make investments that are economically justified.
3. Choose the mutually exclusive investment alternative that maximizes economic worth.
4. Two investment alternatives are equivalent if they have the same economic worth.
5. Marginal revenue must exceed marginal cost.
6. Continue to invest as long as each additional increment of investment yields a return that is greater than the investor's TVOM.
7. Consider only differences in cash flows among investment alternatives.
8. Compare investment alternatives over a common period of time.
9. Risks and returns tend to be positively correlated.
10. Past costs are irrelevant in engineering economic analyses, unless they impact future costs.