What This Book Actually Covers
The textbook by Leland Blank and Anthony Tarquin is the standard reference for FE exam prep and undergraduate engineering economics courses. It covers time value of money, present worth analysis, annual worth, rate of return, depreciation, inflation, and basic decision-making frameworks. The Third Edition was published around 2005 and has been used for over a decade. You will find it referenced in most university syllabi and by candidates preparing for the Fundamentals of Engineering exam. The book itself is structured around tables and factors. Chapter by chapter it moves from single payment compounds to annuities, gradients, perpetuities, and then into more applied territory like replacement analysis and breakeven. The notation can be confusing at first — P, F, A, i, n are used throughout, and the factor notation like (P/F, i%, n) shows up constantly. If you are working through it for the first time, spend time on the interest tables in the appendix before rushing into the problems. I ran into a specific issue while reviewing this material for the PE exam. The book assumes discrete compounding periods throughout most of its examples, but there is one section on continuous compounding where the formulas shift and the tables do not apply. I missed this on my first pass and spent about twenty minutes trying to force the standard factor tables into a problem that required the exponential function instead. The workaround is simple: check whether the problem statement mentions continuous compounding or gives you an effective annual rate derived from a nominal rate compounded continuously. When that happens, drop the tables and use e^(i*n) directly. It cost me time during practice but the concept itself is straightforward once you spot it.
How to Use This Material Effectively
Working through Blank and Tarquin requires a different approach than reading most engineering textbooks. The problems build on each other sequentially. If you skip ahead to later chapters without mastering the factor notation in the first four chapters, you will struggle when the textbook starts combining methods in hybrid problems. I would recommend doing every odd-numbered problem at minimum, and checking your answers against the solution manual. The even-numbered ones are equally useful if you have access to detailed solutions. One counter-intuitive point that most beginners miss: the book's treatment of inflation in later chapters is technically correct but practically limited. The examples assume constant inflation rates and do not address real-world scenarios where inflation fluctuates significantly between project phases. In actual practice, when I have worked on capital budgeting projects with multi-year horizons, we typically model inflation as a variable rather than a fixed percentage. The textbook method gives you a baseline understanding, but it will underrepresent the complexity of long-term infrastructure projects where inflation adjustments materially change the present worth calculation. Another thing the book does not emphasize enough is the sensitivity of Net Present Value to small changes in the discount rate. I worked on a water treatment facility analysis where changing the MARR from 8% to 10% flipped the decision from acceptable to rejected. The textbook walks through NPV as a deterministic calculation, but in practice you should always run a sensitivity sweep across at least three discount rate scenarios. This usually takes about fifteen minutes and prevents expensive misclassifications.
Common Pitfalls
The most frequent error I see is mixing nominal and effective interest rates. The book presents both throughout the chapters, and the notation is consistent within each section, but when you start combining problems from different chapters it becomes easy to apply a nominal rate where an effective rate is needed, or vice versa. Always verify whether a given rate is already an effective rate per period or if it requires conversion. The conversion is straightforward — it is just (1 + r/m)^m - 1 — but skipping this step silently corrupts your entire analysis. A second pitfall involves the gradient factors in Chapter 3. The arithmetic gradient factor (A/G, i%, n) and the geometric gradient factor get confused easily. The arithmetic version assumes constant dollar increments, while the geometric version assumes constant percentage increments. A maintenance cost problem might seem arithmetic at first glance, but if the costs increase as a percentage of the prior year, the geometric formula is the correct one. Misapplying these will give you an answer that looks plausible but is wrong.
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Alternatives and Complements
If you find the Blank and Tarquin approach too dense or the examples insufficiently practical, the Engineering Economic Analysis textbook by Donald Brown, Kelly Koch, and David Anderson provides a more applied perspective with updated examples. It covers the same core topics but uses more recent case studies and includes Excel-based workflows that align better with how engineers actually perform these calculations today. For the FE exam specifically, the NCEES reference handbook remains the primary resource regardless of which textbook you use for preparation. The textbook is also quite dated in its treatment of spreadsheet integration. The 3rd Edition includes some Excel examples but not comprehensively. Most professionals now run their analyses entirely in Excel or specialized software, so I would supplement the book with a practical spreadsheet exercise for each major method. This typically cuts your practice time significantly compared to working problems manually with the factor tables.
