Question

5. Compare Present worth analysis, future worth analysis, annual worth analysis and benefit cost ratio analysis of project evaluation.

Answer 1

Present price is associate equivalence technique of study during which a project’s money flows ar discounted to one gift price. it's maybe the foremost economical associatealysis technique we are able to use for crucial project acceptableness on an economic basis. alternative analysis ways, that we are going to study in Chapters half-dozen and seven, ar engineered on a sound understanding of gift price.

In present-worth analysis, the comparison is formed in terms of the equivalent gift prices and advantages. however the analysis needn't be created in terms of the present-it are often created in terms of a past, present, or future time. though the numerical calculations might look completely different, the choice is unaffected by the chosen purpose in time. usually we have a tendency to do wish to understand what the longer term state of affairs are going to be if we have a tendency to take some explicit couse of action currently. associate analysis supported some future purpose in time is called Future-Worth Analysis.

Annual price (AW) Analysis is outlined because the equivalent uniform annual price of all calculable receipts (income) and disbursements (costs) throughout the life cycle of a project.

Two Cases: 1) Alternatives have identical economic life. 2) Alternatives have completely different economic lives. Case 1: No problemo. figure AW for each variouss and choose alternative that has the best AW or lowest Annual price (AC). Case 2: The AW or AC needs to be calculated for less than one life cycle

A benefit-cost quantitative relation (BCR) could be a quantitative relation utilized in a analytic thinking to summarize the relationship between the relative prices and advantages of a planned project. BCR are often expressed in financial or qualitative terms. If a project contains a BCR larger than one.0, the project is predicted to deliver a positive web gift price to a firm and its investors.

-------------------------------

Hope this will help, please comment if you need any further explanation, Please Encourage us by Up Voting the Answer which is Very Helpful to us. Thank You!

-------------------------------