21. IE451_su14_Ch6 1_Canvas 12th - 21st Lecture by Hansuk...

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1IE 451byHansuk Sohn21stLecture2IE 4513IE 451Annual Cash Flow CalculationsAnnual Cash Flow AnalysisApplying Annual Cash Flow TechniquesUseful Lives Equal the Analysis PeriodUseful Lives Different from the Analysis PeriodInfinite Analysis PeriodChapter Outline4IE 451The most convenient method for comparing project evaluations with an annual budgetGoal:Convert money to an equivalent uniform annual cost , benefit, or their differenceAnnual Cash Flow Analysis
5IE 451Annual Cash Flow CalculationsP(i)n)i,S)(A/F,-(PEUACn)i,S(A/F,-n)i,P(A/P,EUAC0PnS40123AAAAn-1AnA(6-1)(6-3)(6-4)S(i)n)i,S)(A/P,-(PEUAC6IE 451Applying Annual Cash Flow AnalysisSituationCriterionNeither input nor output fixed: typical situationMaximize EUAW (Equivalent Uniform Annual Worth)EUAW=EUAB - EUACFixed input: amount of money or other input resources are fixedMaximize EUAB (Equivalent Uniform Annual Benefits)Fixed output: fixed task, benefit, or other outputsMinimize EUAC (Equivalent Uniform Annual Costs)7IE 451Applying Present Worth AnalysisSituationCriterionNeither input nor output fixed: typical casesMaximize net present worth (present worth of benefits minus present worth of costs)Fixed input: amount of money or other input resources are fixedMaximize present worth of benefits or other outputsFixed output: fixed task, benefit, or other outputsMinimize present worth of costs or other inputs8IE 451Annual Cash Flow & Analysis PeriodAnalysis Period Equal to Alternative LivesEconomic study is based on the analysis periodAnalysis Period a Common Multiple of Alternative LivesUnder the assumption of identical replacement, economic study is based on alternatives’ own livesAnalysis Period for a Continuing RequirementUnder the assumption of identical replacement, economic study is based on alternatives’ own lives
9IE 451

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