Lecture No63-1

Lecture No63-1 - CapitalBudgeting Lecture No 63 Chapter 15...

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Capital Budgeting  Lecture No. 63 Chapter 15 Contemporary Engineering Economics Copyright © 2006
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Capital Budgeting Evaluation of Multiple Investment Alternatives Independent projects Dependent projects Formulation of Mutually Exclusive Alternatives Capital Budgeting Decisions with Limited Budgets
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Formulation of Mutually Exclusive Alternatives -  Independent Projects A and B Alternative Description X a X b 1 Reject A, Reject B 0 0 2 Accept A, Reject B 1 0 3 Reject A, Accept B 0 1 4 Accept A, Accept B 1 1
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Mutually Exclusive Projects (A1, A2)  and (B1, B2) Alternative (X A1 , X A2 ) (X B1 ,X B2 ) 1 (0,0) (0,0) 2 (1,0) (0,0) 3 (0,1) (0,0) 4 (0,0) (1,0) 5 (0,0) (0,1) 6 (1,0) (1,0) 7 (0,1) (1,0) 8 (1,0) (0,1) 9 (0,1) (0,1)
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Contingent Projects (A, B), where B is  Contingent on A Alternative X A X B X C 1 0 0 0 2 1 0 0 3 1 1 0 4 1 1 1
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Example 15.11 Four Energy Saving Projects under  Budget Constraints (Budget Limit = $250,000) Project Investment Annual
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Lecture No63-1 - CapitalBudgeting Lecture No 63 Chapter 15...

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