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Ee Slide Chap 5
Ee Slide Chap 5
Ee Slide Chap 5
Chapter 5
Evaluating a Single Project
VN =?
FW = -$45,000(1.7623)+$14,000(6.3528)+$4,000
Ex. 5.6 - Evaluate the FW of the potential improvement project described in Example 5-1. Show the
relationship between FW and PW for this example.
Ex. 5.7 - In Example 5-2, the $110,000 retrofitted space-heating system was projected to save
$30,000 per year in electrical power and be worth $8,000 at the end of the six-year study period.
Use the FW method to determine whether the project is still economically justified if the system has
zero market value after six years. The MARR is 15% per year.
nq1 2
nhu quynh, 4/17/2019
$477,000
where
Rk = excess of receipts over expenses
in period k,
Ek = excess of expenses over receipts
in period k,
N = project life or number of periods,
ε = external reinvestment rate per
period.
Expenses
Revenue
Solving, we find
and discounted
payback. 3 $10,000 -$9,000 -$12,493