Engineering Economic Analysis

(Chris Devlin) #1
RationingCapital by PresentWorth Methods 527

I

Project
Proposals

Proposal I
1A
IB
IC
IV Donothing

Proposal 2
2A
2B Do nothing

Proposal3
3A
3B
3C Donothing

This is the
desired set of
projects.

2
ComputeNPW
for each
alternative.
.Reject any
alternative
for which NPW
is negative.

From each
project proposal,
select alternative
with the largest
positive NPW.

For Fixed-Sum-of-Money
Constraint

Compute Total Required
Money for this set of projects
Fixed sum is
less than
amount
required
for this set of
projects.
Select an initial
value ofpand
continue with
calculations in
columns
4 and 5.

== FIGURE,17...3Steps in computing-acapital budget =



  • -.. - -...-


Fixed sum is
equal to or
greater than
amount
required
for this set of
projects.
This is the
desired set of
projects.

3 4
Compute for
each alternative
with positive
NPW:
NPW-p(pWof cost)

5
From each project
proposal select,
alternative with the
largest positive
NPW-p(pWof cost)
Omit any project
for which all
values are negative.

Compute Total Required Money
for This Set of Projects

Fixed-Sum-of- Money Constraint

Fixed sum is
less than
amount
required
for this
set of projects.
Increasepand
recompute
columns
4 and 5.


  • --~


Fixed sum is
equal to
amount
required
for this
set of projects.
This is the
desired set of
projects.



Fixed sum is
greater than
amount
required
for this
set of projects.
Decreasep
and recompute
columns
4 and 5.

--~--. :!




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