present worth analysis engineering economics

present worth analysis

1. PRESENT WORTH (PW)
ANALYSIS
In previous Lectures
Relationships between P, F, A and G
Equivalence of Cash Flow
Computing Present-worth of
Cash Flow
Selection among alternatives,
the idea of economic
efficiency is employed
Various Techniques
Present Worth Analysis
Equivalent uniform annual
analysis/Equivalent Annual
Worth Method

2. Faisal Hasan
Associate Professor
Mechanical Engineering Department
Z.H. College of Engineering & Technology, AMU, Aligarh
Present worth analysis(PWA) can
convert/changealternativesintoequivalent
presentconsequences.
PWanalysisismostfrequentlyusedto
determinepresentvalueoffuturemoney
receiptsanddisbursements
PRESENT WORTH (PW)
ANALYSIS
Criterion

3. Calculate the Net PW (PW
Benefit-PW
Cost) at present (n=0) for a
given interest rate of i.
PRESENT WORTH (PW)
ANALYSIS
Decision Rule:
•Accept the Alternative with the Highest
PW Value (if PW is positive): Maximum
Profit/Return
•Accept the Alternative with the Lowest
PW Value (if PW is negative): Minimum
loss/Investment

4. EQUAL & UNEQUAL
LIVES
Equal Lives
Unequal Lives

5. Problem: 3.26: Page 118,
Riggs
Autoconcompanyisevaluatingthreerobotsforpossibleusein
itsassemblyoperations.(Onlyonerobotwillbepurchased)
Dataassociatedwiththeserobotsareasfollows
Robot A Robot B Robot C
First Cost ($) 55000 58000 53000
Operating and Maintenance Cost ($) 3000/year4500/year 4000/year
Expected Income ($) 40000/year44000/year 38000/year
Estimated Salvage Value ($) 4000 6000 4000
Assumingatechnologicallifeof3yearsandadesiredinterest
rateof12%,whichrobotseemstobepreferable,assumingall
otherfactorsareequal?UseanetPresent-worthevaluation

6. Solution to Problem 3.26

8. THANKS