Project Evaluation
Lecture no: 07
Course Code: CEN 703
Jenia Shultana
Lecturer,
Mymensingh Engineering College
Project Evaluation:
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Engineering Economy:
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Future Worth Factor
Definition: The Future Worth Factor, also known as the Single
Payment Compound Amount Factor, is used to calculate the future
value of a single lump-sum investment, taking into account
compound interest over a specified period. It answers the question:
"What will a present investment be worth in the future?"
Example: If you invest $1,000 today at a 5% annual interest rate,
what will it be worth in 5 years?
Answer:
After 5 years, the investment will be worth $1,276.28.
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Present Worth Factor
Definition: The Present Worth Factor, also known as the Single
Payment Present Worth Factor, is used to determine the present
value of a future amount, discounting it using a given interest rate.
It answers the question: "What is the present value of a future
amount?"
Example: What is the present value of $1,500 to be received 3
years from now, if the discount rate is 4%?
Answer:
The present value is $1,333.52.
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Series Future Worth Factor
Definition: The Series Future Worth Factor, also called the Series
Compound Amount Factor, is used to find the future value of a
series of equal periodic payments, compounded at a given interest
rate. It answers the question: "What will a series of regular
payments be worth in the future?"
Example: If you invest $200 annually at an interest rate of 6%,
what will be the future value in 4 years?
Answer:
The future value of the investment will be $874.92
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Series Present Worth Factor
Definition: The Series Present Worth Factor, or Uniform Series
Present Worth Factor, calculates the present value of a series of
equal periodic payments, discounted at a specific interest rate. It
answers the question: "What is the present value of a series of
regular payments?"
Example: What is the present worth of receiving $500 annually for
5 years at a 7% interest rate?
Answer:
The present worth is $2,050.10.
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Sinking Fund Factor
Definition: The Sinking Fund Factor is used to calculate the
amount that needs to be set aside periodically to accumulate a
specific future amount. It answers the question: "How much should
be invested periodically to reach a future goal?"
Example: How much should you save annually to accumulate
$10,000 in 6 years at a 5% interest rate?
Answer:
You should save $1,576.20 annually.
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Capital Recovery Factor
Definition: The Capital Recovery Factor calculates the periodic
payment required to recover the initial investment (capital) over
time, including interest. It answers the question: "What is the
required payment to repay an investment over time?"
Example: If you need to recover an investment of $20,000 over 8
years at a 6% interest rate, what will the annual payment be?
Answer:
The annual payment will be $3,202.80.
Equations
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Math 01
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Math 02
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Math 03
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Math 04
1. To replace the pumps in 15 years, will cost US $ 875,000.
How much should be the annual collection from the
farmers?, given, i=12%
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Math 05
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Present Worth Method
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Annual Worth Method
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Annual Cost Method
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Capitalized Cost (CC)
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Problem(CC)
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Math 06
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Economic Evaluation
Benefit Cost Ratio (BCR) Method
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Economic Evaluation
Rate of Return (IRR) Method
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CBA (Cost-Benefit Analysis)
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Breakeven Point Analysis
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Example 07
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Payback Period
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Problem
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Economic Appraisal of Project
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Economic Appraisal of Project
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Sensitivity Analysis
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Case –A (Discount Factor-10%)
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Discount Factor
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IRR
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Example 8 (IRR Estimation using Several i)
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IRR
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Equipment Replacement
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Cross Over Discount Rate
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Cost Minimization” Problem
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Example 10
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THANK YOU
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