Bilal M. Ayyub
This chapter integrates engineering economics with risk and uncertainty. It introduces fundamental economic concepts, cash flow modeling, interest formulations, equivalence principles, inflation, and discounting. Methods for economic analysis of alternatives, including present worth, internal rate of return, and payback period, are presented. The chapter emphasizes risk finance concepts such as risk-adjusted discount rates, loss financing mechanisms, valuation of resilience and flexibility, and integration with risk metrics. By embedding uncertainty and risk explicitly into economic analysis, this chapter provides a coherent framework for informed investment and policy decisions in engineering projects.