236 Energy Project Financing: Resources and Strategies for Success
Figure A-9 Four investments projectsPWC = –400+120*(P|A,12%,4) = –400+120(3.0373) = –$35.52 ⇒ Reject CPWD = –500+290*(P|A,12%,4) = –500+290(3.0373) = $380.83 ⇒ Accept DTherefore,
Accept Projects A, B, and D and reject Project CA.8.3 Deterministic Constrained Analysis
Constrained analysis is required any time a dependency relation-
ship exists between any of the projects within the set to be analyzed. In
general, dependency exists any time (1) there are insufficient funds avail-
able to undertake all proposed projects (commonly referred to as capital
rationing), (2) there are mutually exclusive projects, or (3) there are con-
tingent projects.
Several approaches have been proposed for selecting the best set of
projects from a set of potential projects under constraints. Many of these
approaches will select the optimal set of acceptable projects under some
conditions (or will select a set that is near optimal). However, only a few
approaches are guaranteed to select the optimal set of projects under all
conditions. One of these approaches is presented below by way of a con-
tinuation of Example 17.