Appendix A 245planning horizon is based on company policies or practices. The standard
horizon may require repetition and/or truncation, depending upon the
set of projects being evaluated.
Example 21
Determine the impact of a 5 year standard planning horizon on proj-
ects A, B, C with lives 3, 5, and 6 years, respectively.
With a 5-year planning horizon:
Project A must be repeated one time, with the second repetition truncated
by one year.
Project B is a 5 year project and does not require repetition or truncation.
Project C must be truncated by one year.
There is no single accepted approach to resolving the planning hori-
zon issue. Companies and individuals generally use one of the approach-
es outlined above. The decision of which to use in a particular analysis
is generally a function of company practice, consideration of the reason-
ableness of the project repeatability assumption, and the availability of
salvage value estimates at truncation points.
A.9 SPECIAL PROBLEMS
A.9.1 Introduction
The preceding sections of this appendix outline an approach for con-
ducting deterministic economic analysis of investment opportunities.
Adherence to the concepts and methods presented will lead to sound in-
vestment decisions with respect to time value of money principles. This
section addresses several topics that are of special interest in some analy-
sis situations.
A.9.2 Interpolating Interest Tables
All of the examples previously presented in this appendix convenient-
ly used interest rates whose time value of money factors were tabulated
in Appendix 4A. How does one proceed if non-tabulated time value of
money factors are needed? There are two viable approaches, calculation