S07 Chap 5-4 - ComparingMutually Lecture No.5-4 Chapter 5...

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Comparing Mutually  Exclusive Alternatives Lecture No.5-4 Chapter 5 Contemporary Engineering Economics Copyright © 2006
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Comparing Mutually Exclusive  Projects Mutually Exclusive Projects Alternative vs. Project Do-Nothing Alternative
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Revenue Projects Projects whose revenues depend on the choice of alternatives Service Projects Projects whose revenues do not depend on the choice of alternative
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Analysis Period The time span over which the economic effects of an investment will be evaluated (study period or planning horizon). Required Service Period The time span over which the service of an equipment (or investment) will be needed.
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Comparing Mutually Exclusive Projects Principle Principle : Projects must be : Projects must be compared over an compared over an equal time equal time span. span. Rule of Thumb Rule of Thumb : If the required : If the required service period is given, the analysis service period is given, the analysis period should be the same as the period should be the same as the required service period.
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