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    ME 291 Engineering Economy: ROR Evaluation Using PW & AW

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    ME-291 Engineering Economy Using PW and AW for the evaluation of ROR. If [?]i B-A MARR, select alternative A. AW of both A and B separately and then find I by 0 = AWB - AWA in the second type we don't need to use the LCM.

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    ME 291 Engineering Economy: ROR Evaluation Using PW & AW

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    salmanshahidkhan
    17 views6 pages
    ME-291 Engineering Economy Using PW and AW for the evaluation of ROR. If [?]i B-A MARR, select alternative A. AW of both A and B separately and then find I by 0 = AWB - AWA in the second type we don't need to use the LCM.

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    Lecture 24

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    ME-291 Engineering Economy Using PW and AW for the evaluation of ROR. If [?]i B-A MARR, select alternative A. AW of both A and B separately and then find I by 0 = AWB - AWA in the second type we don't need to use the LCM.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    17 views6 pages

    ME 291 Engineering Economy: ROR Evaluation Using PW & AW

    Uploaded by

    salmanshahidkhan
    ME-291 Engineering Economy Using PW and AW for the evaluation of ROR. If [?]i B-A MARR, select alternative A. AW of both A and B separately and then find I by 0 = AWB - AWA in the second type we don't need to use the LCM.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 6

    ME 291

    Engineering
    Economy

    ME-291 Engineering
    Economy
    Lecture 24

    ROR Evaluation using PW & AW

    Faculty of Mechanical Engineering


    Ghulam Ishaq Khan Institute, Topi, Swabi
    © Faculty of Mechanical Engineering, GIKI
    Using PW for the ROR
    Evaluation

    • The main idea is to find out i* of the cash flow.


    • Find the ∆i*B-A i.e. the i* of the incremental

    ME-291 Engineering
    cash flow.
    • If ∆i*B-A < MARR, select alternative A

    Economy
    • If ∆i*B-A ≥ MARR, the extra investment is
    justified; select alternative B.
    • If the incremental i* is exactly equal to or very
    near the MARR, non economic considerations
    will most likely be used to help in the selection
    of the “best” alternative.

    © Faculty of Mechanical Engineering, GIKI


    Example 8.3

    ME-291 Engineering
    Economy
    © Faculty of Mechanical Engineering, GIKI
    Solution Example 8.3

    Cash flow diagram of incremental cash flows.

    ME-291 Engineering
    Economy
    By interpolation ∆ i = 12.65%

    © Faculty of Mechanical Engineering, GIKI


    Using AW for the evaluation of ROR

    Two methods for AW


    • Solve the cash flow of the incremental cash

    ME-291 Engineering
    flow using the AW analysis. (in this case we
    have to use LCM if needed).

    Economy
    • Find the AW of both A and B separately and
    then find i* by
    0 = AWB – AWA
    in the second type we don’t need to use the
    LCM.

    © Faculty of Mechanical Engineering, GIKI


    Example 8.5

    ME-291 Engineering
    Economy
    Using first Method i.e. solving the incremental cash flow

    Using second method, i.e. find the AW of the two separately

    © Faculty of Mechanical Engineering, GIKI

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