2,000

5,500 5,500 5,500 5,500 5,500

3,150 3,150 3,150 3,150 3,150

10,000

PW = 2,000 (P/F , 10 % , 5)
+ 5,500(P/A , 10% , 5)
- 3,150 (P/A , 10% , 5)
- 10,000
PW = 2,000 (0.6209213231)
+ 5,500(3.790786769)
- 3,150 (3.790786769)
-10,000

PW = 150.19 ≥ 0
Economically Feasible
@Existing Machine

40k 40k 40k 40k 40k 40k 40k 40k

PW =-40,000 (P/A , 12% , 8)

PW =-40,000 (4.967639767)
PW =-198,705.5907 ≥ 0
30k
@New Machine

22k 22k 22k 22k 22k 22k 22k 22k

90k

PW =30,000 (P/F , 12% , 8)

- 22,000 (P/A , 12%, 8)
-90,000
PW = -187,171.578 ≥ 0 Economically Feasible
 2,000
5,500 5,500 5,500 5,500 5,500

3,150 3,150 3,150 3,150 3,150

10,000

FW = 2,000
+ 5,500(F/A , 10% , 5)
- 3,150 (F/A , 10% , 5)
- 10,000 (F/P , 10%, 5)
FW = 2,000
+ 5,500(6.1051)
- 3,150 (6.1051)
-10,000 (1.61051)

FW =241.885 ≥ 0
Economically Feasible
 5,000
8,000 8,000 8,000 8,000 8,000

25,000

FW = 5,000
+ 8,000(F/A , 20% , 5)
- 25,000 (F/P , 20%, 5)

FW = 5,000
+ 8,000(7.4416)
- 25,000 (2.48832)

FW =P2,324.8 ≥ 0
Economically Feasible
 2,000
5,500 5,500 5,500 5,500 5,500

3,150 3,150 3,150 3,150 3,150

10,000
AW = R – E –CR
CR = I (A/P, i%,n) – S(A/F, i%, n)
CR = 10,000 (A/P, 10%,5) – 2,000(A/F, 10%, 5)
CR = 10,000 (0.2637974808) – 2,000(0.1637974808)
CR =2,310.379846

AW =5,500 – 3,150 - 2,310.379846

AW =39.62015364 ≥ 0
Economically Feasible
 5,000
8,000 8,000 8,000 8,000 8,000

25,000
AW = R – E –CR
CR = I (A/P, i%,n) – S(A/F, i%, n)
CR = 25,000 (A/P, 20%,5) – 5,000(A/F, 20%, 5)
CR = 25,000 (0.3343797033) – 5,000(0.1343797033)
CR =7,687.594066

AW =8,000 – 7,687.594066
AW =312.405934 ≥ 0
Economically Feasible
 SALVAGE
REVENUE PER YEAR
VALUE

EXPENSES PER YEAR

INVESTMENT

INVESTMENT = 5,000,000 + 7,000,000

= 12,000,000
Land Investment P 5,000,000
Building Investment P 7,000,000
REVENUE = 6,000 (25 Units) (0.90) (12 months)
Study Period 20 years
Cost of land after 20 yrs. P 20,000,000 = 1,620,000 per year
Cost of bldg. after 20 yrs. P 2,000,000
Rent per Unit per Month P 6,000 EXPENSES = 500 (25 Units)
Upkeep per Unit per Year P 500 = 12,500 per year

SALVAGE VALUE = 20,000,000 + 2,000,000

= 22,000,000
 1,620,000 22,000,000

12,500
12,000,000

@PRESENT WORTH METHOD

PW = 22,000,000 (P/F , 20 % , 20)
Land Investment P 5,000,000
Building Investment P 7,000,000 + 1,620,000 (P/A , 20% , 20)
Study Period 20 years - 12,500 (P/A , 20% , 20)
Cost of land after 20 yrs. P 20,000,000 - 12,000,000
Cost of bldg. after 20 yrs. P 2,000,000
Rent per Unit per Month P 6,000 PW = 22,000,000 (0.0260840533)
Upkeep per Unit per Year P 500 + 1,620,000 (4.869579733)
- 12,500 (4.86957973)
- 12,000,000
PW = -3,598,301.41
 1,620,000 22,000,000

12,500
12,000,000

@FUTURE WORTH METHOD

Land Investment
Building Investment
Study Period
Cost of land after 20 yrs.
Cost of bldg. after 20 yrs.
Rent per Unit per Month
Upkeep per Unit per Year
FW = 22,000,000
P 5,000,000
P 7,000,000 + 1,620,000 (F/A , 20% , 20)
20 years - 12,500 (F/A , 20% , 20)
P 20,000,000 - 12,000,000 (F/P , 20% , 20)
P 2,000,000
P 6,000 FW = 22,000,000
P 500 + 1,620,000 (186.6879996)
- 12,500 (186.6879996)
- 12,000,000 (38.33759992)

FW = -137,950,239.70
 22,000,000
1,620,000

12,500
12,000,000

@ANNUAL WORTH METHOD

Land Investment P 5,000,000 AW = R – E –CR

Building Investment
Study Period
Cost of land after 20 yrs.
Cost of bldg. after 20 yrs.
Rent per Unit per Month
Upkeep per Unit per Year
P 7,000,000 CR = I (A/P, i%,n) – S(A/F, i%, n)
20 years
P 20,000,000 CR = 12,000,000 (A/P, 20%,20)
P 2,000,000 – 22,000,000(A/F, 20%, 20)
P 6,000
P 500
CR = 12,000,000 (0.205356531)
– 22,000,000(0.005356531)
CR =2,346,434.69
AW =1,620,000 – 12,500 – 2,346,434.69
AW =-789,934.69
Materials P 160,000 / year
Labor P 280,000 / year
overhead P 40,000 + 10% of sales per year
Selling Expenses P 60,000 / year
* GIVE UP HIS REGULAR PAYING JOB
MATERIALS = 160,000 -28,000
= 132,000
LABOR = 280,000 -40,000
= 240,000
OVERHEAD= 40,000 + (800,000 * 0.10)
– 32,000
= 88,000
TOTAL EXPENSES per YEAR
= 132,000 + 240,000 +
88,000 + 60,000
= 520,000
 800,000

520,000
400,000

@PRESENT WORTH METHOD

PW =800,000 (P/A , 20% , 15)
- 520,000 (P/A , 20% , 15)
- 400,000
PW =800,000 (4.675472642)
- 520,000 (4.675472642)
- 400,000
PW = 909,132.34
 800,000

520,000
400,000

@FUTURE WORTH METHOD

FW =800,000 (F/A , 20% , 15)
- 520,000 (F/A , 20% , 15)
- 400,000 (F/P, 20%, 15)
FW =800,000 (72.03510787)
- 520,000 (72.03510787)
- 400,000 (15.40702157)
FW = 14,007,021.57
 800,000

520,000
400,000

@ANNUAL WORTH METHOD

AW = R – E –CR
CR = I (A/P, i%,n) – S(A/F, i%, n)

CR = 400,000 (A/P, 20%,20) - 0

CR = 400,000 (0.21388212)
CR =85,552.85

AW =800,000 – 520,000 -85,552.85

AW =194,447.15
NOTE: IN COMPUTING THE IRR, DETERMINE THE
i’ AT WHICH NET PW IS ZERO
 2,000
5,500 5,500 5,500 5,500 5,500

3,150 3,150 3,150 3,150 3,150

10,000

PW = 0 PW = 2,000 (P/F , i’% , 5)

+ 5,500(P/A ,i’% , 5)
- 3,150 (P/A ,i’% , 5)
- 10,000
0 = 2,000

+ 5,500
- 3,150
- 10,000
i’= 10.5349905% ≥ 10%
• Economically Feasible
 5,000
8,000 8,000 8,000 8,000 8,000

25,000

PW = 0 PW = 5,000 (P/F , i’% , 5)

+8,000(P/A ,i’% , 5)
- 25,000

0 = 5,000

+8,000
- 25,000

i’= 21.5775611 % ≥ 20%

• Economically Feasible
 2,000
5,500 5,500 5,500 5,500 5,500

3,150 3,150 3,150 3,150 3,150

10,000

1. OUTFLOW PWoutflow = 10,000

+ 3,150(P/A , ε% , 5)
PWoutflow = 21,940.97832

2. INFLOW FWinflow = 2,000

+ 5,500(F/A , ε% , 5)
FWinflow =35,578.05
3. i’
 35,578.05

(F/P,i’%,5)
21,940.97832

1. OUTFLOW PWoutflow = 21,940.97832

2. INFLOW FWinflow = 35,578.05
3. i’
21,940.97832 (F/P, i’, 5) = 35,578.05
21,940.97832 ( 1 + 𝑖′ ) = 35,578.05
i’= 10.1501849% ≥ 10%
• Economically Feasible
 5,000
8,000 8,000 8,000 8,000 8,000

25,000

1. OUTFLOW PWoutflow = 25,000

2. INFLOW FWinflow = 5,000

+8,00 (F/A , ε% , 5)
FWinflow =64,532.8
3. i’
 64,532.8

(F/P,i’%,5)

25,000

1. OUTFLOW PWoutflow = 25,000

2. INFLOW FWinflow = 5,000

+8,00 (F/A , ε% , 5)
FWinflow =64,532.8
3. i’
25,000 (F/P, i’, 5) = 64,532.8
25,000( 1 + 𝑖′ ) = 64,532.8
i’= 20.883799% < 25%
• NOT FEASIBLE
 5,000
8,000 8,000 8,000 8,000 8,000

25,000

YEAR K NET CASH CUMULATIVE

FLOW WORTH

0 -25,000 -25,000
1 +8,000 -17,000
2 +8,000 -9,000
3 +8,000 -1,000
4 +8,000 +7,000
5 +13,000 +20,000

θ = 4 YEARS
 5,000
8,000 8,000 8,000 8,000 8,000

(P/F,20%,n)
25,000

YEAR K NET CASH CUMULATIVE

FLOW WORTH

0 -25,000 -25,000
1 +6,667 -18,333
2 +5,556 -12,777
3 +4,630 -8,147
4 +3,858 -4,289
5 +5,223 +934

θ = 5 YEARS
 0
INVESTMENT: (I) 490,000
P 350,000 – LAND
P 600,000 – CONSTRUCTION(RUNWAY)
P 250,000 – CONSTRUCTION (TERMINAL)
197,500
OPERATING & MAINTENANCE COST: (O&M)
1,200,000
P22,500 – RUNWAY
P75,000 – TERMINAL 1. CONVENTIONAL B/C METHOD (PW)
P100,000 – AIR TRAFFIC CONTROLLER
B
BC =
REVENUE/BENEFIT: (B) I – S + (O&M)
P325,000 – RENTAL P490,000(P/A,10%,20)
P65,000 – AIRPORT TAX BC =
P1,200,000 – 0(P/F) + P197,500(P/A,10%,20)
P100,000 – TOURISM BENEFIT
BC = 1.45
SALVAGE VALUE: (S)
P0.00
 0
INVESTMENT: (I) 490,000
P 350,000 – LAND
P 600,000 – CONSTRUCTION(RUNWAY)
P 250,000 – CONSTRUCTION (TERMINAL)
197,500
OPERATING & MAINTENANCE COST: (O&M)
1,200,000
P22,500 – RUNWAY
P75,000 – TERMINAL 1. MODIFIED B/C METHOD (PW)
P100,000 – AIR TRAFFIC CONTROLLER B – (0&M)
BC =
I–S
REVENUE/BENEFIT: (B)
P325,000 – RENTAL P490,000(P/A,10%,20) - P197,500(P/A,10%,20)
P65,000 – AIRPORT TAX BC =
P1,200,000 – 0(P/F)
P100,000 – TOURISM BENEFIT
BC = 2.08
SALVAGE VALUE: (S)
P0.00
 B
BC =
I – S + (O&M)

B – (O&M)
BC =
I–S
 B
BC =
CR+ (O&M)

B – (O&M)
BC =
CR