CIVILEN 3080 Lecture Notes - Lecture 4: Variable-Frequency Drive, Kilowatt Hour, Emerson Radio
2 May 2016
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As a ranking method, pw is easily applied when choosing the preferred alternative from among several mutually exclusive alternatives: choosing the one with the greatest pw over the planning horizon. Two alternative designs that differ in complexity, cost, and predicted revenue are under construction. Investment of ,000 is estimating to produce after-tax revenue of. Investment of ,000 is expected to generate annual after-tax revenue of. A negligible salvage value is assumed for both designs. The present worth of doing nothing is zero. Pwa > 0, definitely choose option a over doing nothing. Pwb > pwa, choose option b over option a. B has the greatest present worth for marr < ~10. 5% A has the greatest present worth for marr > ~10. 5% For marr > ~13%, neither alternative has a positive present worth. The firm has no internal funds to finance the project, so will borrow the entire investment from a bank at an interest rate of i%.
