This paper reports the results of a study carried out for the power optimization of a Rankine-cycle heat-engine using finite-time thermodynamic theory. This study extends the recent flurry of publications in heat-engine efficiency under the maximum power condition by incorporating the optima of heat conductance and heat capacitance ratios. While maximizing the instantaneous power output, it is shown that there is an optimum balance between the sizes of heat exchangers, between the heat capacity rates of heating and cooling fluid as well as temperature differences between the engine and thermal reservoirs. The results indicate that power output increases significantly with the increase in heat capacity rate of the heating fluid, but the thermal efficiency at maximum power remains constant. The effects of thermal conductance of the hot-side heat-exchanger on the power output and thermal efficiency are insignificant. The theoretical efficiency formulated in this study is much closer to that actually observed in well-designed power plants. (C) 2003 Elsevier Ltd. All rights reserved.