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Unformatted text preview: ChE 3171, Spring 2010, Week 3 Three classical cases in profitability analysis. (In the following comments, profits are positive and costs are negative). 1) Yes or no (good investment or not) on a specific project. 2) For choosing between alternative projects. 3) For picking projects from a list for investing a fixed amount of money. Assume you can invest only once in each project and that you cant keep unspent money. Using present value (PV) as a measure: Pick project(s) that maximize PV. In the first of the three cases, accept the project only if the present value is positive. Using rate of return (ROR): Pick project(s) that maximize ROR. In the first of the three cases, accept project if ROR is greater or equal to the minimal acceptable rate of return (MARR). Equivalent uniform annual series or EUAS: The fixed annual annuity that gives the same present value of the project. EUAS = PV i (1 + i ) n (1 + i ) n- 1 where i is time value of money and the factor that multiplies PV is called the...
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- Spring '10