ISE2014_Class17

# ISE2014_Class17 - study period we have to cut it off early...

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Click to edit Master subtitle style Class 17 – Co- termination ISE 2014 Fall 2010

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Your Methods PW Method AW Method FW Method IRR Method Incremental Analysis Incremental IRR Analysis
Co-termination Remember that we have two assumptions for dealing with unequal lives Last class we learned about repeatability Today we learn about co-termination

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Applying Co-termination 1. We determine our study period 2. We apply FW method 3. For all projects with useful life < study period Find equivalent worth at end of useful life Shift EW to the study period with F/P at MARR 4. For all projects with useful life > study period Truncate the project at study period
Why FW Method? Since we’re determining the study period, we need to compare our alternatives on that year If we used PW, we would be ignoring any gaps in time We deal with any gaps in time by using (F/ P,MARR,n)

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Truncating Projects If an option has a useful life longer than the

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Unformatted text preview: study period, we have to cut it off early If there is a salvage value, its not realistic to assume it won’t change Sometimes a new salvage value is given This will be true for HW and Test problems Book provides a method of estimating the new salvage value (I’m not using it) Problem 6-41 Provided on your hand-out Gives us some practice with repeatability and co-termination assumptions Problem 6-55 Provided on your hand-out Gives us some practice with incremental IRR Method Your Methods PW Method AW Method FW Method IRR Method Incremental Analysis Incremental IRR Analysis Clean Up Homework 6 due today at noon Homework 7 posted on Scholar Two problems from homework 7 will be graded for a total of 20 points Next exam Tuesday November 9th 7:00 – 8:30 I need to know by Wednesday November 3rd if you have an official...
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## This note was uploaded on 02/28/2011 for the course ISE 2014 at Virginia Tech.

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ISE2014_Class17 - study period we have to cut it off early...

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