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Lecture 22: Engineering Economics - MS291
Lecture 22: Engineering Economics - MS291
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Learning Outcomes
• Formulate Alternatives
• PW of equal-life alternatives
• PW of different-life alternatives
• Future Worth analysis
• Capitalized Cost analysis
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Learning Outcomes
• Formulate Alternatives
• PW of equal-life alternatives
• PW of different-life alternatives
• Future Worth analysis
• Capitalized Cost analysis
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Formulating Alternatives
• Two types of economic proposals
– Mutually Exclusive (ME) Alternatives: Only one can be selected; Compete against
each other
– Independent Projects: More than one can be selected; Compete only against DN
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Number of Alternatives
• F projects, we have alternatives
• Example: If an engineer has 3 engine models A, B, C and he/she may
choose any combination. There are alternatives to choose from. D/N, A,
B, C, AB, AC, BC, ABC
• Do Nothing (DN) is also an alternative
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Formulating Alternatives
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PW Analysis of Alternatives
Convert all cash flows to PW using MARR
EVALUATION
For one project, if , it is justified
Select alternative Y
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Problem 1.16
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Solution
Land route is a better option because over the next 50 years, it will
save approx. $3 million in present worth compared to the sea route.
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Thank You
Any Questions?
Email: maazullah@giki.edu.pk
• Videos from Dragon’s Den are copy righted. We are using it only for
educational purposes.
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