These notes provide a detailed explanation of present worth (PW) and annual worth (AW) analysis, covering comprehensive definitions, symbols used, and essential formulas. The notes include solved numerical for PW analysis with step-by-step formulas, as well as AW analysis with examples to clarify t...
CAPITAL BUDGETING
PROCESS
Engineering Economy, William G. Sullivan, Elin M. Wicks, C. Pa
Koelling; chapter 4, 5, 6 & 13
Engineering Economic Analysis, Donald G. Newnan, Ted G.
Eschenbach, Jermo P. Lavelle; chapter 4, 5, 6, 7, 8 & 9
,Evaluation & Selection of Capital Budgeting Pro
Evaluation Methods:
Present Worth Analysis
3 Annual Worth Analysis
Internal Rate of Return Analysis
Pay-back Time Analysis
,Terminology and Symbols:
List of important symbols:
P - value or amount of currency at a present time
time 0.
A - series of consecutive, equal, annual, end-of-y
cash flows,
F - value or amount of currency at some future ti
G – annual increase/decrease in cash flows
n - number of years (life of a project)
i - Minimum Acceptance Rate of a Return (MARR
Inflation / cost of financing
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