Engineering Economic Analysis

194 ANNUAL CASH FLOW ANALYSIS

alternatives, and provided the following criteria are met, a valid cash flow analysis may l

made.

1. When an alternativehas reached the end of its useful life, it is assumed to be replace
   by an identical replacement (with the same costs, performance, etc.).


2. The analysis period is a common multiple of the useful lives of the alternatives, (
   there is a continuing or perpetual requirement for the selected alternative.
   If neither condition applies, it is necessary to make a detailed study of the consequence
   of the various alternatives over the entire analysis period with particular attention to th
   difference between the alternatives at the end of the analysis period.
   There is very little numerical differencebetween a long-life alternative and a perpetua
   alternative. As the value ofnincreases, the capital recovery factor approachesi.At tho
   limit,(AI P, i,(0) =i.
   One of the most common uniform payment series is the repayment of loans. Spread
   sheets are useful in analyzing loans (balance due, interest paid, etc.) for several rea
   sons: they have specialized functions, many periods are easy, and any interest rate can bt
   used.

Problems

6-1- Compute the value of C for the following diagram,

based on "a 10% interest rate.

6-3 Compute the value ofE:

60

~ 'f r r

0-1-2-3-4

~ ~ ~ ~

60

1

45

t 3f +

0-1-2-3-4

!!!!

E E E E

i=12%

c c c c

6-4 Ifi=6%, compute the value ofDthat is equivalent

to the two disbursementsshown.

6-2

(Answer:C=$35.72)

Compute the value ofBfor the following diagram:

B B B B B

t t t t t

0-1-2-3-4-5

~ i=15% ~

100

t

0-1-2-3-4-5-6

t t t t "t t

D D D D D D

200

r-

100 100

~

.-'~Answer: D=$52.31)

,

1