ManPro-6 Present Worth Analysis 2019

Present Worth Analysis
Semester Genap TA 2018/2019

DOSEN :
Asri Oktavioni Indraswari
PROGRAM STUDI S1 GEOLOGI DAN GEOFISIKA

FAKULTAS MATEMATIKA DAN ILMU PENGETAHUAN ALAM
UNIVERSITAS INDONESIA
Kampus UI Depok, Depok 16424
• We have learnt two important tasks. First, the concept
of equivalence.
• We are powerless to compare series of cash flows
unless we can resolve them into some equivalent
arrangement.
• Second, equivalence, with alteration of cash flows from
one series to an equivalent sum or series of cash flows,
created the need for compound interest factors.
• A whole series of compound interest factors were
derived—some for periodic compounding and some for
continuous compounding.
PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA
2
2018
ECONOMIC CRITERIA
Depending on the situation, the

economic criterion will be one of the
following:
Situation Criterion
For fixed input Maximize output
For fixed output Minimize input
Neither input nor output fixed Maximize (output – input)

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2018
• Equivalence provides the logic by which we may
adjust the cash flow for a given alternative into
some equivalent sum of series.
• To apply the selection criterion to the outcomes of
the feasible alternatives, we must first resolve
them into comparable units.
• How should they do compared?
• Now we are learning how analysis can resolve
alternatives into equivalent present consequences,
referred to simply as present worth analysis.

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2018
Applying present worth techniques
• One of the easiest ways to compare

mutually exclusive alternatives is to resolve
their consequences to the present time.
• The three criteria for economic efficiency
are restated in terms of present worth
analysis in the table below.

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2018
Table of PRESENT WORTH ANALYSIS
Situation Criterion
Fixed input Amount of money or other Maximize present worth of
input resources are fixed benefits or other outputs
Fixed output There is a fixed task, benefit, Minimize present worth of
or other output to be costs or other inputs
accomplished
Neither input nor Neither amount of money, or Maximize (present worth
output is fixed other inputs, nor amount of of benefits minus present
benefits, or other outputs, is worth of costs), that is,
fixed maximize net present
worth

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2018
• PWA is most frequently used to determine the present
value of future money receipts and disbursements.
• It would help us, for example, to determine a present
worth of income-producing property, like an oil well or
an apartment house.
• If the future income and costs are known, then using a
suitable interest rate, the present worth of the property
may be calculated.
• It could also be used to determine the valuation of
stocks or bonds based on the anticipated future
benefits from owning them.
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2018
• Careful consideration must be given to the
time period covered by the analysis.
• Usually the task to be accomplished has a
time period associated with it.
• The consequences of each alternative must be
considered for this period of time which is
usually called the analysis period or
sometimes the planning horizon.

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2018
There are three different analysis-period
situations that are encountered in economic
analysis problems:
1. The useful life of each alternative equals the

analysis period.
2. The alternatives have useful lives different
from the analysis period.
3. There is an infinite analysis period, n = ∞

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2018
1. Useful lives equal the analysis
period
Since different lives and an infinite analysis

period present some complications, we will
begin with four examples where the useful life
of each alternative equals the analysis period.

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2018
Example No.1
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 five 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?

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2018
Example No.1
400
A = 300 350
300
250
200
n = 5 years
PW of Benefits n = 5 years
PW of Benefits
PW of benefits A = 300(P/A,7%,5) = 300(4.100) = $1230
PW of benefits B = 400(P/A,7%,5) – 50(P/G,7%,5)
= 400(4.100) – 50(7.647) = $1257.65
Device B has the larger present worth of benefits and is, therefore, the
preferred alternative.
It is worth noting that, if we ignore the time value of money, both alternatives
provide $1500 worth of benefits over the five-year period. Device B provides
greater benefits in the first two years and smaller benefits in the last two
years. This more rapid flow of benefits from B, although the total magnitude
equals that of A, results in a greater present worth of benefits.

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2018
Example No.2
Wayne County will build a 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?
Solution: This problem illustrates stage construction. The aqueduct may be built in a single
stage, or in a smaller first stage followed many years later by a second stage to provide the
additional capacity when needed.
For the two-stage construction:

PW of cost = $300 million + 350 million(P/F,6%,25)
= $300 million + 81.6 million = $381.6 million
For the single-stage construction:
PW of cost = $400 million
The two-stage construction has a smaller present worth cost and is the preferred construction
plan.
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2018
Example No.3
A purchasing agent is considering the purchase of some new equipment for the mailroom.
Two different manufacturers have provided quotations. An analysis of the quotation indicates
the following:
Manufacturer Cost Useful life (years) End-of-useful-life salvage value

Speedy $1500 5 $200
Allied $1600 5 $325
The equipment of both manufacturers is expected to perform at the desired level of output.
For a-five-year analysis period, which manufacturer’s equipment should be selected? Assume
7% interest and equal maintenance cost.
Solution: For fixed output, the criterion is to minimize the PW of cost.

Speedy: PW of cost = 1500 – 200(P/F,7%,5) = 1500 – 200(0.7130)
= 1500 – 143 = $1357
Allied: PW of cost = 1600 – 325(P/F,7%,5) = 1600 – 325(0.7130)
= 1600 – 232 = $1368
Although the PW of cost for each of the alternatives is nearly identical, we would,
nevertheless, choose the one with minimum present worth of cost unless there were other
tangible or intangible differences that would change the decision. Buy the Speedy equipment.
14
2018
Example No.4
A firm is trying to decide which of the two alternate weighing scales it should install to check a
package filling operation in the plant. The scales would allow better control of the filling
operation and result in less overfilling. If both scales have lives equal to the six-year analysis
period, which one should be selected? Assume an 8% interest rate.
Alternatives Cost Uniform annual benefit End-of-useful-life salvage value

Atlas $2000 $450 $100
Tom Thumb $3000 $600 $700
Solution:
Atlas scales: PW of benefits – PW of cost = 450(P/A,8%,6) + 100(P/F,8%,6) – 2000
= 450(4.623) + 100(0.6302) – 2000
= 2080 + 63 – 2000 = $143
TT scales: PW of benefits – PW of cost = 600(P/A,8%,6) + 700(P/F,8%,6) – 3000
= 600(4.623) + 700(0.6302) – 3000
= 2774 + 441 – 3000 = $215
The salvage value of the scales, it should be noted, is simply treated as another benefit of the
alternative. Since the criterion is to maximize the PW of benefits minus the PW cost, the
preferred alternative is the Tom Thumb scales.
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Net present worth
In example No. 4, we compared two alternatives

and selected the one where present worth of
benefits minus present worth of cost was a
maximum. The criterion is called the net
present worth criterion and written simply as
NPW:
Net present worth = Present worth of benefits –

Present worth of cost
NPW = PW of benefits – PW of cost

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2018
2. Useful lives different from the
analysis period
Often we can arrange the useful life of each

alternative was equal to the analysis period,
but there will be many more situations where
the alternatives have useful lives different
from the analysis period.

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2018
Still remember Example No.3?
A purchasing agent is considering the purchase of some new equipment for the mailroom. Two
different manufacturers have provided quotations. An analysis of the quotation indicates the
following:

Speedy $1500 5 $200
Allied $1600 5 $325
The equipment of both manufacturers is expected to perform at the desired level of output. For
a-five-year analysis period, which manufacturer’s equipment should be selected? Assume 7%
interest and equal maintenance cost.
Solution: For fixed output, the criterion is to minimize the PW of cost.

Speedy: PW of cost = 1500 – 200(P/F,7%,5) = 1500 – 200(0.7130)
= 1500 – 143 = $1357
= 1600 – 232 = $1368
Although the PW of cost for each of the alternatives is nearly identical, we would, nevertheless,
choose the one with minimum present worth of cost unless there were other tangible or
intangible differences that would change the decision. Buy the Speedy equipment.

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2018
Still remember Example No.3?
Suppose that the Allied equipment was expected to have a ten year useful life, or twice that of
the Speedy equipment. Assuming the Allied salvage value still be $325 ten years hence, which
equipment should now be purchased? We will recompute the present worth of cost of the Allied
equipment.

Speedy $1500 5 $200
Allied $1600 10 $325
Solution:
= 1600 – 165 = $1435
The PW of cost has increased. This is due to the more distant recovery of the salvage value.
More importantly, we now find ourselves attempting to compare Speedy equipment (with its
five-year life), against the Allied equipment with a ten-year life. This variation in the useful life of
the equipment means we no longer have a situation of fixed output. Speedy equipment in the
mailroom for five years is certainly not the same as ten years of service with Allied equipment.
For PW calculations, it is important that we select an analysis period and judge the
consequences of each of the alternatives during the selected analysis period.
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2018
• Not only is the firm and its economic environment important in
selecting an analysis period, but also the specific situation being
analyzed is important.
• If the Allied equipment has a useful life of ten years, and the
Speedy equipment will last five years, one solution is to select a
ten-year analysis period.
• The choice of the least-common-multiple analysis period in
this case means that we would compare the ten-year life of Allied
equipment against an initial purchase of Speedy equipment plus
its replacement with new Speedy equipment in five years.
• The result is to judge the alternatives on the basis of a ten-year
requirement in the mailroom.
• On this basis the economic analysis is as follows:

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2018
Speedy: Assuming the replacement Speedy equipment will also cost $1500 five years
hence,
200 200
1500 1500
PW of cost = 1500 + (1500 – 200)(P/F,7%,5) - 200(P/F,7%,10)
= 1500 + 1300(0.7130) – 200(0.5083)
= 1500 + 927 – 102 = $2325
Allied: 325
1600
PW of cost = 1600 – 325(P/F,7%,10) = 1600 – 325(0.5083 = $1435
For the fixed output ten years of service in the mailroom, the Allied equipment, with its
smaller present
PROGRAM worthGEOLOGI
STUDI SARJANA of cost,DAN
is GEOFISIKA
preferred. 21
2018
3. Infinite analysis period—Capitalized cost
The difficulty in present worth analysis arises when we

encounter an infinite analysis period (n = ∞). In
governmental analyses, at times there are circumstances
where a service or condition is to be maintained for an
infinite period, e.g. roads, dams, pipelines, and so on.
In these situations a present worth of cost analysis would

have an infinite analysis period, and named as
capitalized cost.

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2018
• Capitalized cost is the present sum of
money that would need to be set aside now,
at some interest rate, to yield the funds
required to provide the service (or
whatever) indefinitely.
• To accomplish this, the money set aside for
the future expenditures must not decline.
• The interest received on the money set
aside can be spent, but not the principal.

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As an example, suppose you deposited $200
in a bank that paid 4% interest annually. How
much money could be withdrawn each year
without reducing the balance in the account
below the initial $200?
At the end of the first year, the $200 would

earn 4%($200) = $8 interest.
If the interest were withdrawn, the $200

would remain in the account.

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2018
The year-by-year situation would be depicted like this:
Year 1: $200 initial P → 200 + 8 = 208

Withdrawal iP = - 8
-----
Year 2: $200 → 200 + 8 = 208
Withdrawal iP = - 8
-------
$200
and so on.
Thus, for any initial present sum P, there can be an end-of-period
withdrawal of A equal to iP each period, and these withdrawals may
continue forever without diminishing the initial sum P. This gives a
basic relationship:
For n = ∞, A = Pi
Capitalized cost P = A/i
If we can resolve the desired task or service into an equivalent A,

25
the capitalized cost may be computed.
2018
Example No.5
How much should one set aside to pay $50 per year for maintenance on a
gravesite if interest is assumed to be 4%? For perpetual maintenance, the
principle sum must remain undiminished after making the annual
disbursement.
Solution:
Annual disbursement A
Capitalized cost P = ----------------------------
Interest rate I
P = 50/0.04 = $1250
One should set aside $1250.

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2018
Example No.6
A city plans a pipeline to transport water from a distant watershed area to the city. The pipeline
will cost $8 million and have an expected life for seventy years. The city anticipates it will need
to keep the water line service indefinitely. Compute the capitalized cost assuming 7% interest.
Solution: We have the capitalized cost equation: P = A/i

that is simple to apply when there are end-of-period disbursements A. Here we have renewals
of the pipeline every seventy years. To compute the capitalized cost, it is necessary to first
compute an end-of-period disbursement A that is equivalent to $8 million every seventy years.
$8 million $8 million $8 million $8 million
...
70 years 140 years n= ∞
Capitalized cost
P
The $8 million disbursement at the end of seventy years may be resolved into an equivalent A.
A = F(A/F,i,n) = 8 million(A/F,7%,70) = $8 million(0.00062) = $4960
Capitalized cost P = $8 million + A/i = $8 million + 4960/0.07

= $8,071,000
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2018
Multiple alternatives
• So far the discussion has been based on
examples with only two alternatives.
• However, multiple-alternative problems may
be solved by exactly the same methods
employed for problems with two
alternatives.

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2018
Example No.7
A contractor has been awarded the contract to construct a six-miles-long

tunnel in the mountains. During the five-year construction period, the
contractor will need water from a nearby stream. He will construct a pipeline
to convey the water to the main construction yard. An analysis of costs for
various pipe sizes is as follows:
Pipe size
2” 3” 4” 6”
Installed cost of pipeline
and pump ($) 22,000 23,000 25,000 30,000
Cost per hour for pumping ($) 1.20 0.65 0.50 0.40
The pipe and pump will have a salvage value at the end of five years equal to
the cost to remove them. The pump will operate 2000 hours per year. The
lowest interest rate at which the contractor is willing to invest money is 7%.
(The minimum required interest rate for invested money is called the
minimum attractive rate of return, or MARR). Select the alternative with
the least present worth of cost.

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2018
Example No.7
We can compute the PW of cost for each alternative. For each pipe size, the
PW of cost is equal to the installed cost of the pipeline and pump plus the PW
of five years of pumping costs.
Pipe size
2” 3” 4” 6”
Installed cost of pipeline
and pump ($) 22,000 23,000 25,000 30,000
Cost per hour for pumping ($) 1.20 0.65 0.50 0.40
1.20 x 2000 hr x (P/A,7%,5) 9,840

0.65 x 2000 hr x 4.100 5,330
0.50 x 2000 hr x 4.100 4,100
0.40 x 2000 hr x 4.100 3,280
-------- -------- -------- --------
Present worth of cost ($) 31,840 28,330 29,100 33,280
Select the 3” pipe size.

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2018
Example No.8
An investor paid $8000 to a consulting firm to analyze what he might do with

a small parcel of land on the edge of town that can be bought for $30,000. In
their report, the consultants suggested four alternatives:
Total investment Uniform net Terminal value

including land* annual benefit at end of 20 yr
A: Do nothing $ 0 $ 0 $ 0
B: Vegetable market 50,000 5,100 30,000
C: Gas station 95,000 10,500 30,000
D: Small motel 350,000 36,000 150,000
*Includes the land and structures, but does not include the $8000 fee to the consulting firm.
Assuming 10% is the minimum attractive rate of return, what should the
investor do?

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2018
Example No.8
Solution: Alternative A represents the “do nothing” alternative.

Generally, one of the feasible alternatives in any situation is to remain
in the present status and do nothing. In this problem, the investor
could decide that the most attractive alternative is not to purchase the
property and develop it. This is clearly a do nothing decision.
It should note that even if he does nothing, the total venture would
not be a very satisfactory one. This is due to the fact that the investor
spent $8000 for professional advice on the possible use of property.
But, because the $8000 is a past cost, it is a sunk cost.
This problem is one of neither fixed input nor fixed output, so the
criterion will be to maximize the PW of benefits minus the PW of cost,
or, simply stated, maximize net present worth.

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2018
Example No.8
Alternative A: Do nothing ➔ NPW = 0
Alternative B: Vegetable market

NPW = -50,000 + 5100(P/A,10%,20) + 30,000(P/F,10%,20)
= -50,000 + 5100(8.514) + 30,000(0.1486)
= -50,000 + 43,420 + 4440
= -2120
Alternative C: Gas station

NPW = -95,000 + 10,500(P/A,10%,20) + 30,000(P/F,10%,20)
= -95,000 + 89,400 + 4460
= -1140
Alternative D: Small motel

NPW = -350,000 + 36,000(P/A,10%,20) + 150,000(P/F,10%,20)
= -350,000 + 306,500 + 22,290
= -21,210
The criterion is to maximize net present worth. In this situation, one

alternative has NPW equal to zero, and three alternatives have negative values
for NPW. The best of the four alternatives is the do-nothing with NPW equal to
zero. MATEMATIKA DAN ILMU PENGETAHUAN ALAM
FAKULTAS
33
2018
Example No.9
A piece of land may be purchased for $610,000 to be strip-mined for the underlying
coal. Annual net income will be $200,000 per year for ten years. At the end of the
ten years, the surface of the land will be restored as required by a federal law on
strip mining. The cost of reclamation will be $1,500,000 more than the resale value
of the land after it is restored. Using a 10% interest rate, determine whether the
project is desirable
Solution: The investment opportunity may be described by the following cash flow:
Year Cash flow, in thousands
0 -$610
1-10 +200 (per year)
10 -1500
NPW = -610 + 200(P/A,10%,10) - 1500(P/F,10%,10)
= -610 + 200(6.145) - 1500(0.3855)
= -610 + 1229 - 578
= + 41
Since NPW is positive, the project is desirable.

34
2018
Example No.10
Two pieces of construction equipment are being analyzed:
Year Alternative A ($) Alternative B ($)

0 -2000 -1500
1 +1000 +700
2 +850 +300
3 +700 +300
4 +550 +300
5 +400 +300
6 +400 +400
7 +400 +500
8 +400 +600
Based on an 8% interest rate, which alternative should be selected?

35
2018
Example No.10
Solution: Alternative A
1000
850
700
550
400 400 400 400
2000
PW of benefits = 400(P/A,8%,8) + 600(P/A,8%,4) – 150(P/G,8%,4)

= 400(5.747) + 600(3.312) – 150(4.650)
= 3588.50
PW of cost = 2000
Net present worth= 3588.50 – 2000
= + 1588.50

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2018
Example No.10
Solution: Alternative B
700
600
500
400
300 300 300 300
1500
PW of benefits = 300(P/A,8%,8) + (700 – 300)(P/F,8%,1)

+ 100(P/G,8%,4)(P/F,8%,4)
= 300(5.747) + 400(0.9259) + 100(4.650)(0.7350)
= 2436.24
PW of cost = 1500
Net present worth= 2436.24 – 1500
= + 936.24
To maximize NPW, choose Alternative A.

37
2018
Assumption in solving economic
analysis problems
• One of the difficulties of problem solving is that
most problems tend to be very complicated.
• It becomes apparent that some simplifying
assumptions are needed to make such problems
manageable.
• The trick is to solve the simplified problem and still
be satisfied that the solution is applicable to the
real problem.
• There are six different items of the assumptions
that are made.

38
2018
(1) End-of-year convention
• Economic analysis textbooks follow the end-of-year

convention.
• This makes “A” a series of end-of-period receipts or
disbursements.
• A cash flow diagram of P, A, and F for the end-of-period
convention is as follows:
Year 0 (End of) Year 1 (End of) Year 2
Jan 1 Dec 31 Jan 1 Dec 31
A
A
P
F

39
2018
(1) End-of-year convention
• If one were to adopt a middle-of-period convention, the

diagram would be:
Middle of Middle of (End of)
Year 0 Year 1 Year 2 Year 2
Jun 30 Dec 31 Jan 1 Jun 30 Dec 31
Jan 1
A A
P F
• As the diagrams illustrate, only A shifts; P remains at the

beginning-of-period and F at the end-of-period, regardless
of the convention. The Compound Interest Tables are
based on the end-of-period convention.
40
2018
(2) Viewpoint of economic analysis studies
• When making economic analysis calculations, one must

proceed from a point of reference.
• Generally, one will want to take the point of view of a
total firm when doing industrial economic analyses.
• E.g. printing work in the shipping department...
• It is important that the viewpoint of the study be carefully
considered.
• The viewpoint of the total firm is the normal point or
reference in industrial economic analyses.

41
2018
(3) Sunk cost
• This is the differences between alternatives that are

relevant in economic analysis.
• Events that have occurred in the past really have no
bearing on what one should do in the future.
• Past costs, like past events, have no bearing on deciding
between alternatives unless the past costs somehow
affect the present or future costs.
• In general, past costs do not affect the present or the
future, so it is referred as sunk costs and disregard them.

42
2018
(4) Borrowed money viewpoint
• There are two aspects of money to determine: one is the

financing—the obtaining of money.
• The other is the investment—the spending of money.
• The conventional assumption in economic analysis is that
the money required to finance alternatives/solutions in
problem solving is considered to be borrowed at
interest rate i.

43
2018
(5) Effect of inflation and deflation
• Assumption so far is that prices are stable.
• This means that a machine that costs $5000 today can be
expected to cost the same amount several years.
• Inflation and deflation is a serious problem in many
situations, but at the moment it is disregarded.
(6) Income taxes

• This aspect of economic analyses must be considered if a
realistic analysis is to be done.

44
2018
Thank You
PROGRAM STUDI SARJANA GEOLOGI

45
2018

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Present Worth Analysis

Semester Genap TA 2018/2019

Asri Oktavioni Indraswari

PROGRAM STUDI S1 GEOLOGI DAN GEOFISIKA

Depending on the situation, the

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

• One of the easiest ways to compare

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

1. The useful life of each alternative equals the

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Since different lives and an infinite analysis

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

A firm is considering which of two mechanical devices to

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

For the two-stage construction:

Manufacturer Cost Useful life (years) End-of-useful-life salvage value

Solution: For fixed output, the criterion is to minimize the PW of cost.

Alternatives Cost Uniform annual benefit End-of-useful-life salvage value

In example No. 4, we compared two alternatives

Net present worth = Present worth of benefits –

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Often we can arrange the useful life of each

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Manufacturer Cost Useful life (years) End-of-useful-life salvage value

Solution: For fixed output, the criterion is to minimize the PW of cost.

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Manufacturer Cost Useful life (years) End-of-useful-life salvage value

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

PW of cost = 1600 – 325(P/F,7%,10) = 1600 – 325(0.5083 = $1435

The difficulty in present worth analysis arises when we

In these situations a present worth of cost analysis would

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

At the end of the first year, the $200 would

If the interest were withdrawn, the $200

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Year 1: $200 initial P → 200 + 8 = 208

Capitalized cost P = A/i

If we can resolve the desired task or service into an equivalent A,

One should set aside $1250.

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Solution: We have the capitalized cost equation: P = A/i

$8 million $8 million $8 million $8 million

Capitalized cost P = $8 million + A/i = $8 million + 4960/0.07

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

A contractor has been awarded the contract to construct a six-miles-long

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

1.20 x 2000 hr x (P/A,7%,5) 9,840

Select the 3” pipe size.

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

An investor paid $8000 to a consulting firm to analyze what he might do with

Total investment Uniform net Terminal value

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Solution: Alternative A represents the “do nothing” alternative.

PROGRAM STUDI SARJANA GEOLOGI DAN GEOFISIKA

Alternative B: Vegetable market

Alternative C: Gas station

Alternative D: Small motel

The criterion is to maximize net present worth. In this situation, one