📚 Engineering Economics – Chapter 4: Comparative Analysis of Alternatives (Full Chapter + Free PDF + Numerical Problems)
🚀 Preparing for your Engineering Economics exams? Get the complete Chapter 4: Comparative Analysis of Alternatives covered in both video format and free PDF notes! These resources will help you understand key concepts quickly, revise efficiently, and score better in your exams.
🎥 Watch the Full Chapter Video Here:
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👉 Click Here to Watch Numerical Part 1 on YouTube
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📚 What’s Covered in This Chapter? This chapter focuses on various methods used to compare multiple engineering projects or investment alternatives. It helps in selecting the best option based on financial and economic considerations.
📌 Key Topics in This Chapter: ✔️ Comparing Mutually Exclusive Alternatives with the Same Useful Life
Payback Period Method
Equivalent Worth Method
Rate of Return Methods
Benefit-Cost Ratio Method
✔️ Comparing Mutually Exclusive Alternatives with Different Useful Lives
Repeatability Assumption
Co-Terminated Assumption
Capitalized Worth Method
✔️ Comparing Mutually Exclusive, Contingent, and Independent Projects in Combination Understanding how to analyze and compare projects when they are interdependent or contingent upon other factors.
📚 Want to learn all these topics in detail? Watch the full video now and download the PDF notes for quick revisions!
📂 Download Free PDF Notes – Chapter 4: Comparative Analysis of Alternatives To help you with exam preparation, we’ve compiled well-structured, exam-oriented notes in PDF format. These notes are perfect for:
👉 Quick concept understanding
👉 Last-minute revision
👉 Focusing on exam-relevant topics
🔽 Click below to download the PDF now!
🔽 Click below to download the PDF now!
To help you with exam preparation, we’ve compiled well-structured, exam-oriented notes in PDF format. These notes are perfect for:
✅ Quick concept understanding
✅ Last-minute revision
✅ Focusing on exam-relevant topics
🔽 Click below to download the PDF now!
📂 📂 Download Notes – Engineering Economics Chapter 2
Introduction
In engineering decision-making, selecting the most economically viable alternative is crucial. This chapter focuses on methodologies to compare different engineering projects or investment options, aiding in the selection of the best alternative based on financial and economic considerations.
Key Topics Covered
1. Comparing Mutually Exclusive Alternatives with the Same Useful Life
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Payback Period Method: Calculates the time required to recover the initial investment.
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Equivalent Worth Methods:
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Present Worth (PW)
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Future Worth (FW)
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Annual Worth (AW)
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Rate of Return Methods:
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Internal Rate of Return (IRR)
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Modified Internal Rate of Return (MIRR)
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Benefit-Cost Ratio (BCR) Method: Evaluates the ratio of benefits to costs.
2. Comparing Mutually Exclusive Alternatives with Different Useful Lives
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Repeatability Assumption: Assumes that projects can be repeated to match the analysis period.
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Co-Terminated Assumption: Adjusts project durations to a common analysis period.
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Capitalized Worth Method: Used for projects with infinite or very long durations.
3. Comparing Mutually Exclusive, Contingent, and Independent Projects in Combination
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Mutually Exclusive Projects: Only one project can be selected.
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Contingent Projects: The selection of one project depends on another.
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Independent Projects: Projects that can be selected simultaneously without affecting each other.
Numerical Problems
To reinforce understanding, consider the following problems:
Problem 1: Payback Period Method
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Project A: Initial Investment = $80,000; Annual Cash Inflow = $20,000
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Project B: Initial Investment = $100,000; Annual Cash Inflow = $25,000
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Solution:
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Project A Payback Period = $80,000 / $20,000 = 4 years
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Project B Payback Period = $100,000 / $25,000 = 4 years
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Both projects have the same payback period; further analysis is needed for selection.
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Problem 2: Equivalent Worth Method
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Alternative A: Initial Cost = $50,000; Annual Cash Inflow = $10,000; Useful Life = 6 years; Interest Rate = 8%
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Alternative B: Initial Cost = $70,000; Annual Cash Inflow = $13,000; Useful Life = 8 years; Interest Rate = 8%
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Solution:
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Calculate the Present Worth (PW) of both alternatives using the given interest rate and compare.
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Problem 3: Capitalized Worth Method
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Project: Initial Investment = $90,000; Annual Benefit = $12,000; Interest Rate = 10%
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Solution:
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Capitalized Worth = Annual Benefit / Interest Rate = $12,000 / 0.10 = $120,000
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Since Capitalized Worth > Initial Investment, the project is economically viable.
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Problem 4: Benefit-Cost Ratio Analysis
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Project: Cost = $150,000; Annual Benefits = $30,000; Duration = 7 years; Discount Rate = 6%
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Solution:
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Calculate the Present Worth of benefits and compare with the cost to determine the BCR.
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📌 Numerical Problems for Chapter 4
📂 Download Notes – Engineering Economics Chapter 4
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📌 Past Questions & Important Numericals on Engineering Economics 📖✨
🚀 Struggling with Engineering Economics? Ace your exams with our collection of past questions & important numericals! 💡💰
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📌 Numerical Problems for Chapter 4
To reinforce your understanding of key concepts, here are some numerical problems related to the topics covered in this chapter:
👉 Try them now & boost your problem-solving skills! 🚀🧠
Problem 1: Payback Period Method
Question: Project A requires an initial investment of $80,000 and generates annual cash inflows of $20,000. Project B requires an investment of $100,000 and generates annual cash inflows of $25,000. Determine the payback period for both projects and identify the better alternative.
Problem 2: Equivalent Worth Method
Question: Two investment alternatives, A and B, have the following data:
Alternative A: Initial cost = $50,000, Annual cash inflow = $10,000, Useful life = 6 years, Interest rate = 8%
Alternative B: Initial cost = $70,000, Annual cash inflow = $13,000, Useful life = 8 years, Interest rate = 8%
Determine which alternative is better using the present worth method.
Problem 3: Capitalized Worth Method
Question: A project requires an initial investment of $90,000 and generates an annual benefit of $12,000 forever. If the interest rate is 10%, determine the capitalized worth of the project.
Problem 4: Benefit-Cost Ratio Analysis
Question: A government project has a cost of $150,000 and generates annual benefits of $30,000 for 7 years. If the discount rate is 6%, determine whether the project should be accepted based on the benefit-cost ratio method.
📌 Explore More Lessons from Engineering Economics
📢 Want complete notes for the entire Engineering Economics course? Check out other chapters below:
📚 Chapter 1: Introduction to Engineering Economics – Download PDF
📚 Chapter 2: Interest and Time Value of Money – Download PDF
📚 Chapter 3: Basic Engineering Economic Analysis Methods – Download PDF
📚 Chapter 4: Comparative Analysis of Alternatives – Download PDF
📚 Chapter 5: Replacement Analysis – Download PDF
📚 Chapter 6: Risk Analysis in Engineering Economics – Download PDF
📚 Chapter 7: Depreciation & Corporate Income Taxes – Download PDF
📚 Chapter 8: Inflation & Its Impact on Project Cashflows – Download PDF
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