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Engineering Economy, 5/e
Leland Blank, Texas A&M University
Anthony Tarquin, University of Texas - El Paso
Rate of Return Analysis: Single Alternative

Learning Objectives

Purpose: Make annual worth calculations and compare alternatives using the annual worth method.

This chapter will help you:


1. Definition of ROR

State the meaning of rate of return.

2. ROR using PW and AW

Calculate the rate of return using a present worth or annual worth equation.

3. Cautions about ROR

Understand the difficulties of using the ROR method, relative to PW and AW methods.

4. Multiple RORs

Determine the maximum number of possible ROR values and their values for a specific cash flow series.

5. Composite ROR

Calculate the composite rate of return using a stated reinvestment rate.

6. ROR of bonds

Calculate the nominal and effective interest rate for a bond investment.








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