Learned in ECE192.
Present Worth Analysis
This is just using the Present Worth Factor.
You need to be very careful because both alternatives have different service lives (pages 17-19 show the wrong calculations). We need to apply the repeated lives method to get a fair comparison.
Just visualize the following cash flow diagram:
Future Worth Analysis
This is just using the Compound Amount Factor.
Example is super similar, just need to be careful to wrap your head around the calculation.
- Everything is relative to the future, so you don’t need to worry about calculating in terms of the present. This was confusing to me for the $15,000 cost
Capitalized Cost Analysis
This is so easy. It’s basically the Series Present Worth Factor where .
Annual Worth Analysis
The AW, or Equivalent Uniform Annual Worth (EUAW), represents a measure of project profitability as an equivalent annual value.
This is basically using Capital Recovery Factor.
Rate of Return (ROR) Analysis
Incremental Rate of Return