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Engineering (391)
ENGG 209 (6)
Lecture

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Department
Engineering
Course
ENGG 209
Professor
Ronald Schlenker
Semester
Fall

Description
Analysis of Independent Investments 1)Payback Method a)project must pay back initial investment within certain number of years. b) payback period c) too simplistic d) Discounted payback period- number of years recover initial investment using discounted cash flows. PresentWorth Criteria a) minimum attractive rate of return - rate of return that firm wishes to make on its investment b) estimate economic life of project c) estimate cash flows in each period d) find present worth of each cash flow given the MARR e) If PW>0 accept project.If PW<0 reject project. FutureWorth Criteria If FW>0 accept,otherwise reject. Annual EquivalentWorth(AE orAW) AE=PW(A/P,i,N) IfAE>0,accept.Otherwise reject. This is useful for annual reporting formats,unit costs,unequal project lives & replacement analysis. Capital & Operating Costs a) capital costs - incurred in purchasing assets used in production and service. b) operating costs - incurred by operating of plant and equipment.
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