Engineering Economy, 5/e

Leland Blank, Texas A&M University
Anthony Tarquin, University of Texas - El Paso

Present Worth Analysis

Learning Objectives

Purpose: Compare mutually exclusive alternatives on a present worth basis, and apply extensions of the present worth method.

This chapter will help you:

Identify mutually exclusive and independent projects, and define a service and a revenue alternative.

Select the best of equal-life alternatives using present worth analysis.

Select the best of different-life alternatives using present worth analysis.

Select the best alternative using future worth analysis.

Select the best alternative using capitalized cost calculations.

Determine the payback period at i=0% and i>0%, and state the shortcomings of payback analysis.

Perform a life-cycle cost analysis for the acquisition and operations phase of a (system) alternative.

Calculate the present worth of a bond investment.

Develop spreadsheets that use PW analysis and its extensions, including payback period.

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