Investment Appraisal Methods
Based on cash flow equivalence, the following are the basic methods for IAM.
Equivalent Present Worth
Equivalent Future Worth
Equivalent Annual Worth
ADAMA SCIENCE AND TECHNOLOGY UNIVERSITY SCHOOL
OF CIVIL ENGINEERING AND ARCHITECTURE
DEPARTMENT OF CIVIL ENGINEERING
Course Title: ENGINEERING ECONOMICS
Program: 5th year Civil Eng.
A/Y & Sem.: 2020/21, Second Sem.
4.1 INTRODUCTION
Investment Appraisal Methods
Based on cash flow equivalence, the following are the
basic methods for IAM.
Equivalent Present Worth
Equivalent Future Worth
Equivalent Annual Worth
Cash Flows System
1. When source is Bank 2. When source is Company
Loan Investment
Bank ---------→ Customer , Company --------→ Project
Repayment Return
, ASTU Engineering Economics Compiled By: Nati
Investment Types:
1. Independent Investment:
This means that a decision on one investment does not
affect the other.
2. Mutual Exclusive Investment:
In this case acceptance of one automatically eliminates
the others.
Project Balance:
Suppose you have taken a loan and repay it at i %. one
needs to know the outstanding balance remaining at any
time t.
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