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Engr Muiz Abdur Raqib
Mechanical Engineer
Present Worth
PRESENT WORTH OF ALTERNATIVES WITH EQUAL LIVES
A firm is considering which of two mechanical devices to install to reduce costs in a particular
situation. Both devices cost $1000 and have useful lives of 5 years and no salvage value.
Device A can be expected to result in $300 savings annually.
Device B will provide cost savings of $400 the first year but will decline $50 annually,
making the second-year savings $350, the third year savings $300, and so forth.
With interest at 7%, which device should the firm purchase?
03 present-worth
Wayne County will build an aqueduct to bring water in from the upper part of the state. It can be built at a
reduced size now for $300 million and be enlarged 25 years hence for an additional $350 million.
An alternative is to construct the full-sized aqueduct now for $400 million.
Both alternatives would provide the needed capacity for the 50-year analysis period.
Maintenance costs are small and may be ignored. At 6% interest, which alternative should be selected?
Small Size Duct
Selection from Alternatives
6%
A firm is trying to decide which of two weighing scales it should install to check a
package-filling operation in the plant. The ideal scale would allow better control of
the filling operation and result in less overfilling. If both scales have lives equal to the
6-year analysis period, which one should be selected? Assume an 8% interest rate.
8%
PRESENT WORTH OF ALTERNATIVES WITH UN-EQUAL LIVES
USE LEAST COMMON MULTIPLE OF LIVES
Different Life of Alternative
A purchasing agent is considering the purchase of some new equipment for the mail
room. Two different manufacturers have provided quotations. An analysis of the
quotations indicates the following:
Use Least Commomn Multiple to find common life
Different Life of Alternative Use Least Commomn Multiple to find common life
PRESENT WORTH OF ALTERNATIVES WITH UN-EQUAL LIVES BUT LEAST
COMMON MULTIPLE IS VERY HIGH
A diesel manufacturer is considering the two alternative production machines
graphically depicted in Figure 5-1. Specific data are as follows.
03 present-worth
PRESENT WORTH OF ALTERNATIVE WHEN PROJECT LIFE IS INIFINITY
03 present-worth
PRESENT WORTH OF MULTIPLE ALTERNATIVES
03 present-worth

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03 present-worth

  • 1. Engr Muiz Abdur Raqib Mechanical Engineer
  • 3. PRESENT WORTH OF ALTERNATIVES WITH EQUAL LIVES
  • 4. A firm is considering which of two mechanical devices to install to reduce costs in a particular situation. Both devices cost $1000 and have useful lives of 5 years and no salvage value. Device A can be expected to result in $300 savings annually. Device B will provide cost savings of $400 the first year but will decline $50 annually, making the second-year savings $350, the third year savings $300, and so forth. With interest at 7%, which device should the firm purchase?
  • 6. Wayne County will build an aqueduct to bring water in from the upper part of the state. It can be built at a reduced size now for $300 million and be enlarged 25 years hence for an additional $350 million. An alternative is to construct the full-sized aqueduct now for $400 million. Both alternatives would provide the needed capacity for the 50-year analysis period. Maintenance costs are small and may be ignored. At 6% interest, which alternative should be selected? Small Size Duct Selection from Alternatives
  • 7. 6%
  • 8. A firm is trying to decide which of two weighing scales it should install to check a package-filling operation in the plant. The ideal scale would allow better control of the filling operation and result in less overfilling. If both scales have lives equal to the 6-year analysis period, which one should be selected? Assume an 8% interest rate.
  • 9. 8%
  • 10. PRESENT WORTH OF ALTERNATIVES WITH UN-EQUAL LIVES USE LEAST COMMON MULTIPLE OF LIVES
  • 11. Different Life of Alternative A purchasing agent is considering the purchase of some new equipment for the mail room. Two different manufacturers have provided quotations. An analysis of the quotations indicates the following: Use Least Commomn Multiple to find common life
  • 12. Different Life of Alternative Use Least Commomn Multiple to find common life
  • 13. PRESENT WORTH OF ALTERNATIVES WITH UN-EQUAL LIVES BUT LEAST COMMON MULTIPLE IS VERY HIGH
  • 14. A diesel manufacturer is considering the two alternative production machines graphically depicted in Figure 5-1. Specific data are as follows.
  • 16. PRESENT WORTH OF ALTERNATIVE WHEN PROJECT LIFE IS INIFINITY
  • 18. PRESENT WORTH OF MULTIPLE ALTERNATIVES