ENGG 209 Lecture Notes - Mansfield

• School: University of Calgary
• Department: Engineering
• Course: ENGG 209
• Professor: Ronald Schlenker

Document Summary

1)payback method a)project must pay back initial investment within certain number of years: payback period, too simplistic, discounted payback period- number of years recover initial investment using discounted cash. Present worth criteria: minimum attractive rate of return. Rate of return that rm wishes to make on its investment: estimate economic life of project, estimate cash ows in each period, nd present worth of each cash ow given the marr, if pw>0 accept project. This is useful for annual reporting formats, unit costs, unequal project lives & replacement analysis. Capital & operating costs: capital costs - incurred in purchasing assets used in production and service, operating costs - incurred by operating of plant and equipment, capital recovery cost (cr) Salvage value in 20 years is 120 million. Pw pro le: for simple investments, i* equals the internal rate of return (irr). This is a clear indication of if a project is a simple investment.