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ENGINEERING ECONOMY Fifth Edition

Blank and Tarquin
Mc
Graw
Hill
CHAPTER V
PRESENT WORTH
ANALYSIS
Blank & Tarquin: 5th Edition. Ch. 5 Authored By: Dr. Don Smith, Texas A&M University.
LEARNING OBJECTIVES
PURPOSE OF THIS CHAPTER
FORMULATION OF MUTUALLY EXCLUSIVE

ALTERNITIVES
PROPER COMPARISON/ANALYSIS OF
MUTUALLY EXCLUSIVE ALTERNATIVES
PRESENT WORTH METHOD
EXTENSIONS OF THE PRESENT WORTH
METHOD
CHAPTER TOPICS
Formulating Alternatives
PW of Equal-Life Alternatives
PW of Different-Life alternatives
Future Worth Analysis
Capitalized Cost Analysis
Payback Period
Life-Cycle Costs
PW of Bonds
Spreadsheet Applications
5.1 FORMULATING MUTUALLY EXCLUSIVE

ALTERNATIVES
Viable firms/organizations have the
capability to generate potential
beneficial projects for potential
investment
Two types of investment categories
Mutually Exclusive Set

Independent Project Set

ALTERNATIVES
Mutually Exclusive set is where a
candidate set of alternatives exist
(more than one)
Objective: Pick one and only one from
the set.
Once selected, the remaining
alternatives are excluded.
5.1 INDEPENDENT PROJECT SET

Given a set of alternatives (more than
one)
The objective is to:
Select the best possible combination of

projects from the set that will optimize a
given criteria.
Subjects to constraints
More difficult problem than the mutually
exclusive approach

ALTERNATIVES
Mutually exclusive alternatives compete
with each other.
Independent alternatives may or may
not compete with each other
The independent project selection
problem deals with constraints and may
require a mathematical programming or
bundling technique to evaluate.
5.1 Type of Alternatives

Revenue/Cost the alternatives consist
of cash inflow and cash outflows
Select the alternative with the maximum

economic value
Service the alternatives consist mainly

of cost elements
Select the alternative with the minimum

economic value (min. cost alternative)
5.1 Evaluating Alternatives
Part of Engineering Economy is the

selection and execution of the best
alternative from among a set of
feasible alternatives
Alternatives must be generated
from within the organization
One of the roles of engineers!
5.1 Evaluating Alternatives
In part, the role of the engineer to

properly evaluate alternatives from
a technical and economic view
Must generate a set of feasible
alternatives to solve a specific
problem/concern
10
5.1 Alternatives
Do
Nothing
Analysis
Alt.
1
Problem
Alt.
2
Alt.
m
Selection
Execution
11
5.1 Alternatives: The Selected Alternative
Problem
Alt.
Selected
Execution
Audit and Track
Selection is dependent upon the data, life,

discount rate, and assumptions made.
12
5.2 Present Worth Approach Equal-Lifes

Simple Transform all of the current
and future estimated cash flow back to
a point in time (time t = 0)
Have to have a discount rate before the
analysis in started
Result is in equivalent dollars now!
13
5.2 THE PRESENT WORTH METHOD

A process of obtaining the
equivalent worth of future cash
flows to some point in time
called the Present Worth

At an interest rate usually equal to or
greater than the Organizations
established MARR.
14
P(i%) = P( + cash flows) +

P( - cash flows)
OR, . . .
P(i%) = P(+) P(-).
15
If P(i%) > 0 then the project is

deemed acceptable.
If P(i%) < 0 the project is usually
rejected.
If P(i%) = 0 Present worth of costs = Present
worth of revenues
Indifferent!
16
If the present worth of a project turns out to =

0, that means the project earned exactly the
discount rate that was used to discount the cash
flows!
The interest rate that causes a cash flows NPV
to equal 0 is called the Rate of Return of the
cash flow!
17
For P(i%) > 0, the following holds true:
A positive present worth is a dollar

amount of "profit" over the minimum
amount required by the investors
(owners).
18

Depends upon the Discount Rate Used
The present worth is purely a

function of the MARR (the
discount rate one uses).
If one changes the discount rate, a
different present worth will result.
19
For P(i%) > 0, the following

holds true:
Acceptance or rejection of a
project is a function of the timing
and magnitude of the project's
cash flows, and the choice of the
discount rate.
20
5.2 PRESENT WORTH: Special

Applications
Present Worth of Equal Lived

Alternatives
Alternatives with unequal lives: Beware
Capitalized Cost Analysis
Require knowledge of the discount rate
before we conduct the analysis
21
5.2 PRESENT WORTH: Equal Lives
Present Worth of Equal Lived

Alternatives straightforward
Compute the Present Worth of each
alternative and select the best, i.e.,
smallest if cost and largest if profit.
22
5.2 Equal Lives Straightforward!

Given two or more alternatives with
equal lives.
Alt. 1
Alt. 2
N = for all
alternatives
Alt. N
Find PW(i%) for each alternative then compare
23
5.2 PRESENT WORTH: Example

Consider:
Machine A Machine B
First Cost
$2,500
$3,500
Annual Operating Cost
900
700
Salvage Value
200
350
Life
5 years
5 years
i = 10% per year
Which alternative should we select?
24
5.2 PRESENT WORTH: Cash Flow Diagram

F5=$200
MA
0
A = $900
$2,500
F5=$200
MB
0
$3,500
A = $700
Which alternative should we select?
25
5.2 PRESENT WORTH: Solving

PA = 2,500 + 900 (P|A, .10, 5)
200 (P|F, .01, 5)
= 2,500 + 900 (3.7908) - 200 (.6209)
= 2,500 + 3,411.72 - 124.18 = $5,788
PB = 3,500 + 700 (P|A, .10, 5)

350 (P|F, .10, 5)
= 3,500 + 2,653.56 - 217.31 = $5,936
SELECT MACHINE A: Lower PW cost!
26
5.3 PRESENT WORTH: Different Lives
Present Worth of Alternatives with

Different Lives
Comparison must be made over equal
time periods
Compare over the least common multiple,

LCM, for their lives
27
5.3 PRESENT WORTH: Unequal Lives
Present Worth of Alternatives with

Different Lives
Remember if the lives of the
alternatives are not equal, one must
create or force a study period where
the life is the same for all of the
alternatives
28
5.3 Present Worth with Unequal Lives: The Rule
In an analysis one cannot effectively
compare the PW of one alternative with

a study period different from another
alternative that does not have the same
study period.
This is a basic rule!
29
5.3 PRESENT WORTH: Lowest Common

Multiple of Lives
If the alternatives have different study

periods, you find the lowest common
life for all of the alternatives in
question.
Example: {3,4, and 6} years. The
lowest common life is 12 years.
Evaluate all over 12 years for a PW
analysis.
30
5.3 PRESENT WORTH: Example Unequal

Lives
EXAMPLE
Machine A Machine B
First Cost
$11,000
$18,000
Annual Operating Cost
3,500
3,100
Salvage Value
1,000
2,000
Life
6 years
9 years
i = 15% per year

Note: Where costs dominate a problem it is customary to assign a
positive value to cost and negative to inflows
31
5.3 PRESENT WORTH: Example Unequal

Lives
A common mistake is to
compute the present
worth of the 6-year
project and compare it to
the present worth of the
9-year project.
NO! NO! NO!
32
5.3 PRESENT WORTH: Unequal Lives

Machine A
0
F6=$1,000
A 1-6
F6=$2,000
=$3,500
$11,000
2
Machine B
A 1-9
=$3,100
i = 15% per year

$18,000
LCM(6,9) = 18 year study period will apply for present worth

33
5.3 Unequal Lives: 2 Alternatives

Machine A
6 years
6 years
Cycle 1 for A
Cycle 2 for A
6 years
Cycle 3 for A
Machine B
9 years
9 years
Cycle 1 for B
Cycle 2 for B
18 years
i = 15% per year

LCM(6,9) = 18 year study period will apply for present worth
34
5.3 Example: Unequal Lives Solving

LCM = 18 years
Calculate the present worth of a 6-year cycle
for A
PA = 11,000 + 3,500 (P|A, .15, 6)
1,000 (P|F, .15, 6)
= 11,000 + 3,500 (3.7845) 1,000 (.4323)
= $23,813, which occurs at time 0, 6 and 12
35
5.3 Example: Unequal Lives

Machine A
0
$23,813
12
$23,813
18
$23,813
PA= 23,813+23,813 (P|F, .15, 6)+

23,813 (P|F, .15, 12)
= 23,813 + 10,294 + 4,451 = 38,558
36
5.3 Unequal Lives Example: Machine B
Calculate the Present Worth of a 9-year

cycle for B
F6=$2,000
A 1-9
=$3,100
$18,000
37
5.3 9-Year Cycle for B

Calculate the Present Worth of a 9-year cycle
for B
PB = 18,000+3,100(P|A, .15, 9)
1,000(P|F, .15, 9)
= 18,000 + 3,100(4.7716) - 1,000(.2843)
= $32,508 which occurs at time 0 and 9
38
5.3 Alternative B 2 Cycles

Machine A: PW =$38,558
0
$32,508
18
$32,508
PB = 32,508 + 32,508 (P|F, .15, 9)

= 32,508 + 32,508(.2843)
PB = $41,750
Choose Machine A
39
5.3 Unequal Lives Assumed Study

Period
Study Period Approach
Assume alternative: 1 with a 5-year life

Alternative: 2 with a 7-year life
Alt-1: N = 5 yrs
LCM = 35 yrs
Alt-2: N= 7 yrs
Could assume a study period of, say, 5 years.
40
5.3 Unequal Lives Assumed Study

Period
Assume a 5-yr. Study period
Estimate a salvage value for the 7-year
project at the end of t = 5
Truncate the 7-yr project to 5 years
Alt-1: N = 5 yrs
Alt-2: N= 7 yrs
Now, evaluate both

over 5 years using
the PW method!
41
5.4 FUTURE WORTH APPROACH

FW(i%) is an extension of the present
worth method
Compound all cash flows forward in
time to some specified time period
using (F/P), (F/A), factors or,
Given P, the F = P(1+i)N
42
5.4 Applications of Future Worth

Projects that do not come on line until
the end of the investment period
Commercial Buildings
Marine Vessels
Power Generation Facilities
Public Works Projects
Key long time periods involving

construction activities
43
5.4 Future Worth Example (Figure 5.3)
See Example 5.3

Calculate the Future Worth of
determining the selling price in order to
earn exactly 25% on the investment
Draw the cash-flow diagram!!
44
5.5 CAPITALIZED COST
CAPITALIZED COST- the present worth

of a project that lasts forever.
Government Projects
Roads, Dams, Bridges (projects that
possess perpetual life)
Infinite analysis period
45
5.5 Derivation for Capitalized Cost

Start with the closed form for the P/A factor
(1 i) 1
P A
N
i(1 i)
N
Next, let N approach infinity and divide the

numerator and denominator by (1+i)N
46
5.5 Derivation - Continued

Dividing by (1+i)N yields
1
1 (1 i ) N
P A
Now, let n approach infinity and the

right hand side reduces to.
47
5.5 Derivation - Continued
1 A
P A
i i
Or,
CC(i%) = A/i
48

Assume you are called on to maintain a
cemetery site forever if the interest rate
= 4% and $50/year is required to
maintain the site.
1
5 ..
..
N=inf.
A=$50/yr
P=?
Find the PW of an infinite annuity flow
49

P0 = A[P/A,i%,N]
1
5 ..
..
N=inf.
A=$50/yr
P=?
Find the PW of an infinite annuity flow
(1 i ) N 1
P A
, let N
N
i(1 i)
(1 i ) N 1 1
lim N
N
i(1 i) i
P0=A(1/i)
50
P0 = $50[1/0.04]
P0 = $50[25] = $1,250.00
Invest $1,250 into an account that
earns 4% per year will yield $50 of
interest forever if the fund is not
touched and the i-rate stays constant.
51
5.5 CAPITALIZED COST: Endowments

Assume a wealthy donor wants to endow a
chair in an engineering department.
The fund should supply the department with
$200,000 per year for a deserving faculty
member.
How much will the donor have to come up
with to fund this chair if the interest rate =
8%/yr.
52
5.5 CAPITALIZED COST: Endowed Chair

The department needs $200,000 per year.
P = $200,000/0.08 = $2,500,000
If $2,500,000 is invested at 8% then the
interest per year = $200,000
The $200,000 is transferred to the department,

but the principal sum stays in the investment to
continue to generate the required $200,000
53
5.5 Capitalized Cost Example
EXAMPLE
Calculate the Capitalized Cost of a
project that has an initial cost of
$150,000. The annual operating cost is
$8,000 for the first 4 years and $5000
thereafter. There is an recurring
$15,000 maintenance cost each 15
years. Interest is 15% per year.
54
5.5 Cash Flow Diagram

i=15%/YR
0
15
30
$4,000
$8,000
$150,000
$15,000
$15,000
$15,000
$15,000
N=
How much $$ at t = 0 is required to fund this

project?
The capitalized cost is the total amount of $ at t
= 0, when invested at the interest rate, will
provide annual interest that covers the future
needs of the project.
55
5.5 CAPITALIZED COST - Example

Continued
1. Consider $4,000 of the $8,000 cost
for the first four years to be a one-time
cost, leaving a $4,000 annual operating
cost forever.
2.855
P0= 150,000 + 4,000 (P|A,
.15, 4) =
$161,420
56
5.5 CAPITALIZED COST - Continued

Recurring annual cost is $4,000 plus the
equivalent annual of the 15,000 end-ofcycle cost.
0
15
30
45
60 ..
Take any 15-year period and find the equivalent

annuity for that period using the F/A factor.
57
5.5 CAPITALIZED COST: One Cycle

Take any 15-year period and find the equivalent
annuity for that period using the F/A factor
15
30
45
60 ..
$15,000
A for a 15-year period
58

2. Recurring annual cost is $4,000 plus
the equivalent annual of the 15,000
end-of-cycle cost.
A= 4,000 + 15,000 (A|F, .15, 15)
= 4,000 + 15000 (.0210) = $5,315

Recurring costs = $5,315/i =
5,315/0.15 =$3,443/yr
59

Capitalized Cost = 161,420 + 5315/.15
= $196,853
Thus, if one invests $196,853 at time t
= 0, then the interest at 15% will
supply the end-of-year cash flow to
fund the project so long as the principal
sum is not reduced or the interest rate
changes (drops).
60
5.6 Payback Period Analysis

Two forms for this method
Discounted Payback Period (uses an interest

rate)
Conventional Payback Period (does not use
an interest rate)
Payback is the period of time it takes for

the cash flows to recover the initial
investment.
61
5.6 Payback Period Analysis

Discounted Payback Approach
Find the value of np such that:

t np
0 P NCFt ( P / F , i, t )
t 1
62
5.6 Payback Period Analysis - Example

Example 5.8
i = 15%
Machine 1: N=7
Machine 2: N=14
63
5.6 Payback Period Analysis - Example 5.8

Tabular Format: Machine 1
64
5.6 Payback Period Analysis- Machine A
Payback
is
between
6 and 7
yeas
(6.57 yrs)
PW(15%)= +$481.00
65
5.6 Non-Discounted Analysis Machine A

At a 0
interest rate
the PB time
is seen to
equal 4
years!
66
5.6 Payback for Machine B at 15%, N = 14 yrs

Payback for B is
between 9 and
10 years!
Longer time
period to
recover the
investment.
9.52 years
67
5.6 Payback at 0% for Machine B
Payback for B at
0% is 6 years!
68
5.6 Payback for Example 5.8

Discounted
Machine A: 6.57 years

Machine B: 9.52 years
Undiscounted
Machine A: 4.0 years

Machine B: 6.0 years
Go with Machine A lower time period

payback to recover the original
investment
69
5.6 Payback Method Summarized

Payback is only a rough estimator of
desirability
Use as an initial screening method
Avoid using this method as a primary
analysis technique for selection projects
Totally avoid the no-return payback
period
70
5.6 Payback Method Summarized

The No-return method
Does not employ the time value of money

Disregards all cash flows past the payback
time period
If used, can lead to conflicting selections
when compared to more technically correct
methods like present worth!
71
5.7 Life Cycle Costs (LCC)

Extension of the Present Worth method
Used for projects over their entire life
span where cost estimates are
employed
Used for:
Military/Defense Projects
New Product Lines
Large construction projects
72
5.7 Life Cycle Defined Detailed Phases

Needs Assessment Phase
Conceptual Design Phase
Detailed Design Phase
Production/Construction Phase
Operation (upgrading to extend)
Phase
Retirement/Disposal Phase
The life can be for years into the future
73
5.7 Life Cycle: Two General Phases
Cost-$
Cumulative Life Cycle
Costs
Acquisition Phase
Operation Phase
TIME
74
5.7 Life-Cycle Costs: Impact of Design

Changes
Cost of a design change tends to
multiply by 10 with each phase
Any design changes that might occur
late in the life cycle drastically increase
the total life cycle costs!
75
5.7 Life-Cycle Costs: Acquisition Phase

Rule: About 80% of LCC are locked in
by the end of the Acquisition Phase.
Emphasis is on good design!
Costs - $
Needs Assessment
Conceptual Design
Detailed Design
Acquisition Phase
76
5.7 Life-Cycle Costs Purpose

Make explicit as possible the
relationship of costs over the total life
span of a product/system
Design Process Objective
Minimize the life-cycle costs

And meet other performance requirements
By making correct trade-offs between costs
in the acquisition phase and costs during
the operations phase
77
5.7 Life-Cycle Costs Warning

Beware of introducing certain costcutting measures in the acquisition
phase and early production phase
Such cost-cutting measures could
impact the future operations and
degrade safety or require modifications
later on
These cost-cutting measures can be
misleading and dangerous!
78
5.7 Life-Cycle Costs Warning

Engineers have a ethical and moral
responsibility to ensure that designs
are:
Economically sound
Functional
Safe
Perform as expected
79
5.8 Present Worth of Bonds

Bonds represent a source of funds for
the firm.
Bonds are sold (floated) by investment
banks for firms in order to raise
additional debt capital
A bond is similar to an IOU
Bonds are evidence of Debt
80
5.8 Bond Types Treasury Bonds

Treasury bonds
Issued by Federal Government

Full backing of the Government
1 year or less; 2-10 year issues; and 10-30
year issues
Conservative-type investment
81
5.8 Bond Types Municipal Bonds

State and Municipal Bonds
Issued by states and local governments

Generally tax-exempt by the Federal
Government
Used to finance state and local projects
Backed by future tax and user fees to pay
the interest and face value
82
5.8 Bond Types Mortgage Bonds

Mortgage Bonds
Issued by Corporations
Secured by the firms assets
Money received by the firm is used to fund
projects
Referred to a Debt Capital
Buyers of these bonds are not owners they
are lenders to the firm
83
5.8 Bond Types Debentures

Debenture Bond
Issued by Corporations
Not backed by specific assets
Backing good faith of the firm
Pays higher interest rates
Higher risks involved
Bond interest rate may float
Could be convertible to common stock
84
5.8 Present Worth of Bonds Overview
Investment Bankers
The Firm
Sell the Bonds to

The lending public
Proceeds from
The sale
Commissions/Fees
Bondholders
85
5.8 Bonds Basics

Bonds are negotiable instruments
Can be traded by the current
bondholder
Source of funds to the firm
Debt capital
Bondholders are loaning $$ to the firm
Earn periodic interest
Sell the bonds at any time
86
5.8 Bonds Firms View

Firm authorizes a bond sale
Bonds are sold by an outside agency
Firm pays a commission to the selling
agency
The firm receives the proceeds from the
sale
This is now DEBT capital to the firm
87
5.8 Bond Basics Continued

The bondholders are not owners
They are lendors
The firm pays periodic interest
payments to the current bond holders
At the end of the bonds life, the bonds
are redeemed (bought back) from the
current bond holder
88
5.8 Bond Basics - Continued

The bond itself is just a piece of paper
Evidence of the debt the firm has
incurred
The firm may be able to call the bonds
back by paying the current bondholder a
calculated sum
89
5.8 Bonds Notation

P0 The time t = 0 selling price of the
bond the cost to the buyer of the bond
V The face value of the bond
The value printed on the bond
Face values are usually:

$100, $1,000, $5,000, $10,000 increments
N The life of the bond in years

r The nominal annual bond interest
rate
90
5.8 Bonds Notation and Example

Given the nominal annual bond interest
rate, the payment frequency of the
interest (monthly, quarterly semiannually, etc.) is also stated
Example:
V = $5,000 (face value)

r = 4.5% per year paid semiannually
N = 10 years
91
5.8 Bonds Example Continued

The interest the firm would pay to the
current bondholder is calculated as:
0.045
I $5, 000(
) $5, 000(0.0225)
2
I $112.50 every 6 months
The bondholder, buys the bond and will receive
$112.50 every 6 months for the life of the bond
92
5.8 Bonds Example 5.11

Given
V = $10,000 (Face value of the bond)

r = 4.5% paid semiannually
N = 10 years or 20 interest periods
$I/6 months = $5,000(0.045/2) = $112.50
paid to the current bondholder
Bonds are bought at sold in a bond market. Thus

the price of the bond is subject to the pressures of
the bond market.
93
5.8 Example 5.11

Key Point The purchase price of the
bond can be considered a value that is
determined by a willing buyer and a
willing seller.
Assume the potential buyer of this bond
requires a interest rate of no less than
8%/year compounded quarterly.
94
5.8 Example 5.11 Continued

The purchaser will consider this bond if
he/she can earn 8%/yr c.q.
What is fixed?
The future interest payments are fixed

The future face value of the bond in fixed
What can vary?
The purchase price such that the buyer can

earn at least the 8%/yr c.q.
95
5.8 Example 5.1 Continued
8% c.q is the same as
0.08/4 = 0.02 = 2% per quarter.

Bond interest flows every 6 months
Need an effective 6-month rate
The effective 6-month rate is then
(1.02)2 1 0.0404 = 4.04%/6 months
This is the potential buyers required
interest rate
96
5.8 Example 5.11 Solving

The objective is to determine the
purchase price of this bond discounted
at the buyers required rate of 4.04%
per 6 months
Draw the cash-flow diagram
Work the problem with N = 20 (not 10)
We have 20 interest payments (every 6

months) = 10 years
97
5.8 Example 5.11 Cash-Flow Diagram
$5,000
i=4.04%/6 months
A = 112.50/6 months
0
P=??
..
19
20
Find the PW(4.04%) of the future cash

flows to the potential bond buyer
98
5.8 Example 5.11 Solving

P = $112.50(P/A,4.04%,20)
+ $5,000(P/F,2%,40)
P = $3,788
IF the buyer can buy this bond for
$3,788 or less, he/she will earn at least
the 8% c.q. rate.
99
Summary: Present Worth

Present Worth is the basic analysis approach for
most engineering economy studies.
It also forms a basis for the Internal Rate of
Return method to be presented later
Requires knowledge of the discount rate as part
of the analysis
100
Summary: Present Worth

PW represents a family of methods
Annual worth
Future Worth
Capitalized Cost
Life-cycle cost analysis application
Bond Problems application
101
End of Chapter 5 Lecture Set
102

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ENGINEERING ECONOMY Fifth Edition

FORMULATION OF MUTUALLY EXCLUSIVE

5.1 FORMULATING MUTUALLY EXCLUSIVE

Mutually Exclusive Set

5.1 FORMULATING MUTUALLY EXCLUSIVE

5.1 INDEPENDENT PROJECT SET

Select the best possible combination of

5.1 FORMULATING MUTUALLY EXCLUSIVE

5.1 Type of Alternatives

Select the alternative with the maximum

Service the alternatives consist mainly

Select the alternative with the minimum

5.1 Evaluating Alternatives

Part of Engineering Economy is the

One of the roles of engineers!

5.1 Evaluating Alternatives

In part, the role of the engineer to

5.1 Alternatives: The Selected Alternative

Audit and Track

Selection is dependent upon the data, life,

5.2 Present Worth Approach Equal-Lifes

5.2 THE PRESENT WORTH METHOD

called the Present Worth

5.2 THE PRESENT WORTH METHOD

P(i%) = P( + cash flows) +

P(i%) = P(+) P(-).

5.2 THE PRESENT WORTH METHOD

If P(i%) > 0 then the project is

5.2 THE PRESENT WORTH METHOD

If the present worth of a project turns out to =

5.2 THE PRESENT WORTH METHOD

For P(i%) > 0, the following holds true:

A positive present worth is a dollar

5.2 THE PRESENT WORTH METHOD

The present worth is purely a

5.2 THE PRESENT WORTH METHOD

For P(i%) > 0, the following

5.2 PRESENT WORTH: Special

Present Worth of Equal Lived

5.2 PRESENT WORTH: Equal Lives

Present Worth of Equal Lived

5.2 Equal Lives Straightforward!

5.2 PRESENT WORTH: Example

5.2 PRESENT WORTH: Cash Flow Diagram

Which alternative should we select?

5.2 PRESENT WORTH: Solving

PB = 3,500 + 700 (P|A, .10, 5)

5.3 PRESENT WORTH: Different Lives

Present Worth of Alternatives with

Compare over the least common multiple,

5.3 PRESENT WORTH: Unequal Lives

Present Worth of Alternatives with

5.3 Present Worth with Unequal Lives: The Rule

In an analysis one cannot effectively

compare the PW of one alternative with

5.3 PRESENT WORTH: Lowest Common

If the alternatives have different study

5.3 PRESENT WORTH: Example Unequal

i = 15% per year

5.3 PRESENT WORTH: Example Unequal

5.3 PRESENT WORTH: Unequal Lives

i = 15% per year