Appendix A 231ΣRtP|F,i,t
t = 0nΣCtP|F,i,t
t = 0n ≥^1which is the decision rule for SIR.The SIR represents the ratio of the present worth of the revenues to
the present worth of the costs. If this ratio exceeds one, the investment is
attractive.
The concept of savings investment ratio as a measure of investment
worth can be generalized as follows:
Measure of Worth: Savings Investment Ratio
Description: The ratio of the present worth of positive cash flows to the
present worth of (the absolute value of) negative cash flows is formed us-
ing i = MARR.
CalculationApproach: SIR =
ΣRtP|F,i,t
t = 0nΣCtP|F,i,t
t = 0nDecision Rule: If SIR ≥1, then the investment is attractive.
Example 16
Reconsider the thermal window data of Example 13. If the savings
investment ratio measure of worth is to be used, is this an attractive in-
vestment?
From example 13, we know that for i = 15%:
SIR =
ΣRtP|F,i,t
t = 0nΣCtP|F,i,t
t = 0n