# 2.jpeg - Important Note I would like for you to work this...

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Unformatted text preview: Important Note: I would like for you to work this problem using both methods. Present worth analysis (method) simply means that all cash ﬂows (F or A) must be converted to a present value or sum (P) at time zero. When determining EUAC using this method. one ﬁr_st determines the present worth of cost (PWC) at time zero for a_ll of the cash ﬂows; then you simply convert the PWC to an EUAC in the second step. Annual cost analysis (method) simply means that all cash ﬂows (P or F) must be converted to a uniform series or annuity (A). Recall that it takes M factors (two steps) to convert a single payment (P or F) to a uniform series (A) when the single payment occurs between time zero and time n. In other words, it will take two factors or two steps to convert the periodic overhauls to an EUAC using this method. Problem 5 — This problem involves the selection of the "best alternative" from among two alternatives (options). In this case, we are comparing a new truck versus a used truck. As with any "time value of money" problem that we work in this class, we must ﬁrst decide if we are going to use present worth analysis (method) or annual cost analysis (method) to solve the problem. The key factor in this decision lies in determining if the alternatives have equal useful lives or unequal lives. For additional information on this topic. see Slides 90 through 96 on "Alternative Analysis" in the Chapter 2 lecture. You may also ﬁnd Section 2.6 of your textbook (pp. 8—11) to be helpful as well. Be sure and check out Example Probiem 2.7 (pp. 9-11) as well. How does one select the best alternative after performing the analysis? We select the alternative with the lower present worth- of cost (PWC) or the lower equivalent uniform annual cost (EUAC). If you have any queﬁtions or if I can assist you in any way. please email me at michaelJeaverton u.edu or call me at my home ofﬁce at any time. Thanks, Michael Leaverton Ofﬁce: Livermore Center, Room 102 Home Ofﬁce: (806)—620-9725 CONE 330i] - Construction Equipment Page 2 of 2 Homework Assignment #1 Spring Semester 2015 . Revised 01-12—15 ...
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• Spring '14
• MichaelLeaverton
• Leaverton

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