Engineering Economic Analysis

Graphing with SpreadsheetsforSensitivity and Breakeven Analysis 289

FIGURE 9~6 Breakeven chart for

Example 9-10.

$6000

Alternative I Alternative

B II C

$5000 Preferred I Preferred

'€ $4000

~

(^5) '"$3000
£
~$2000
$1000
o $1000 $2000 $3000 $4000 $5000 $6000
InitialCost of AlternativeB
initial cost above $4300, C is preferred. We have a breakeven point at $4300. WhenBhas an
ipitial cost of $4300,Band C are equally desirable.
Sensitivity analysis and breakeven point calculations can be very useful in identifying how
different estimates affect the calculations. It must be recognized that these calculations
assume that all parameters except one are held constant, and the serisitivityof the decision
to that one variable is evaluated. Later we will look further at the impact of parameter
estimates on decision making.
GRAPHING WITH SPREADSHEETS FOR SENSITIVITY

Spreadsheets and Replacement Analysis

Chapter 4 introduced drawing xy plots with spreadsheets, and Chapter 7 reviewed this

procedure for plotting present worth versusi.The Chapter 7 plot is an example of breakeven

analysis, as it is used to determine at what interest rate does the project break even or have

a present worth of O. This section will present some of the spreadsheet tools and options

that can make thexy plots more effective and attractive.

The spreadsheet tools and options can be used to:

·Modify thexoryaxes

Specify the minimum or maximum value

Specify at what value the other axis intersects (default is 0)

·Match line types to data

Use line types to distinguish one curve from another

Use markers to show real data

Use lines without markers to plot curves (straight segments or smooth curves)