Measure of Definitions Worth (a) Annual worth (1) Converts all cash flows to a single sum equivalent at t = |(planning horizon) using i = MARR (b) Discounted (2) Converts all cash flows to a single sum equivalent at t= payback period 0 using i = MARR (c) Capitalized (3) Converts all cash flows to an equivalent uniform series worth over the planning horizon (d) External (4) Determines an interest rate that yields a PW (or FW or AW) of 0 rate of return (e) Future worth (5) Determines how long it takes for the cumulative present worth to be positive at i = MARR |(f) Internal rate of (6) Determines the interest rate that equates the future worth of invested capital to the future worth of recovered capital invested at i = MARR return (g) Present worth (7) Determines the PW when the planning horizon is infinitely long

Measure of Definitions Worth (a) Annual worth (1) Converts all cash flows to a single sum equivalent at t = |(planning horizon) using i = MARR (b) Discounted (2) Converts all cash flows to a single sum equivalent at t= payback period 0 using i = MARR (c) Capitalized (3) Converts all cash flows to an equivalent uniform series worth over the planning horizon (d) External (4) Determines an interest rate that yields a PW (or FW or AW) of 0 rate of return (e) Future worth (5) Determines how long it takes for the cumulative present worth to be positive at i = MARR |(f) Internal rate of (6) Determines the interest rate that equates the future worth of invested capital to the future worth of recovered capital invested at i = MARR return (g) Present worth (7) Determines the PW when the planning horizon is infinitely long

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Match the measures of worth in the first column with an appropriate definition from the second column.

Measure of
Definitions
Worth
(a) Annual
worth
(1) Converts all cash flows to a single sum equivalent at t =
|(planning horizon) using i = MARR
(b) Discounted (2) Converts all cash flows to a single sum equivalent at t=
payback
period
0 using i = MARR
(c) Capitalized (3) Converts all cash flows to an equivalent uniform series
worth
over the planning horizon
(d) External
(4) Determines an interest rate that yields a PW (or FW or
AW) of 0
rate of
return
(e) Future
worth
(5) Determines how long it takes for the cumulative present
worth to be positive at i = MARR
|(f) Internal
rate of
(6) Determines the interest rate that equates the future worth
of invested capital to the future worth of recovered
capital invested at i = MARR
return
(g) Present
worth
(7) Determines the PW when the planning horizon is
infinitely long

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