Engineering Economics Present Worth

In summary, the conversation discusses three different alternatives, X, Y, and Z, and their initial cost, annual benefits, and useful life. It also mentions the MARR for all three alternatives. The task at hand is to find the Net Present Worth for each alternative. The provided solution shows the calculation for Alt. Y and mentions a typo in one of the choices for Alt. X and Alt. Z.
  • #1
MHrtz
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0

Homework Statement



Three different alternatives shown below are being considered. Assume that alternatives X and Z are replaced at the end of their lives


Alt. X Alt. Y Alt. Z
Initial Cost - 6000 1000 1500

Annual Benefits - 810 125 230

Useful Life - 20 infinite 10

MARR = 12% for all

Find the Net Present Worth for Alt. X, Alt. Y, and Alt. Z.

Homework Equations



capitalized cost A = iP

F = A [((1 + i)n - 1))/i]

P = A [((1 + i)n - 1))/i(1 + i)n]

The Attempt at a Solution



I found the NPW for Alt. Y

P = (125/.12) - 1000 = 41.67

I'm still stuck on X and Z.
 
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  • #2
Nevermind. One of choices was a typo so I got it right.
 

FAQ: Engineering Economics Present Worth

What is "Engineering Economics Present Worth"?

"Engineering Economics Present Worth" is a method of evaluating the financial viability of a project or investment by calculating the present value of all future cash flows associated with it. It takes into account the time value of money and allows for comparison of different projects with varying costs and timelines.

How is "Engineering Economics Present Worth" calculated?

The present worth of a project is calculated by discounting all future cash flows to their present values, using a predetermined interest rate or discount rate. The sum of all discounted cash flows is then compared to the initial investment to determine the net present worth.

What is the significance of the "Engineering Economics Present Worth" calculation?

The "Engineering Economics Present Worth" calculation is used to assess the profitability and potential return on investment of a project. It allows for comparison of different projects and helps decision-makers determine which option is the most financially feasible.

What are the limitations of the "Engineering Economics Present Worth" method?

The "Engineering Economics Present Worth" method relies on certain assumptions and estimates, such as the discount rate and future cash flows. These may not always be accurate and can affect the final present worth calculation. Additionally, it does not take into account non-financial factors that may impact the success of a project.

How is the "Engineering Economics Present Worth" method used in engineering?

The "Engineering Economics Present Worth" method is commonly used in engineering to evaluate the feasibility of projects such as new construction, equipment purchases, and process improvements. It helps engineers and project managers make informed decisions based on the financial viability of a project.

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