Present-Worth Analysis
XL Chemicals is thinking of installing a computer process control system in one of its process plants. The plant is used about 40% of the time, or 3,500 operating hours per year, to produce a proprietary demulsification chemical（化学破乳剂）. During the remaining 60% of the time, it is used to produce other specialty chemicals. Annual production of the demulsification chemical amounts to 30,000 kilograms, and it sells for $15 per kilogram. The proposed computer process control system will cost $650,000 and is expected to provide the following specific benefits in the production of the demulsification chemical: 1, the selling price of the product could be increased by $2 per kilogram because the product will be of higher purity, which translates into better demulsification. 2, production volumes will increase by 4,000 kilograms per year as a result of higher reaction yields, without any increase in the quantities of raw material or in production time. 3, the number of process operators can be reduced by one per shift, which represents a savings of $25 per hour. The new control system would result in additional maintenance costs of $53,000 per year and has an expected useful life of eight years.
Contemporary Engineering Economics
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Chapter 4. Present-Worth Analysis
Key terms
• • Independent Investment Projects – 独立项目 Mutually Exclusive Investment Projects –互斥项目
The nominal interest rate is determined by summing the individual interest rates per period.
Contemporary Engineering Economics
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Chapter 3. Understanding Money and Its Management
Contemporary Engineering Economics
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Chapter 3. Understanding Money and Its Management
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3. Effective Annual Interest Rates
Assuming that the nominal interest rate is r, and M compounding periods occur during the year, we can calculate the effective annual interest rate.
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8. Project Risk
Chapter 4. Present-Worth Analysis
Agenda
Describing Project Cash Flows Initial Project Screening Method
Discounted Cash Flow Analysis
Contemporary Engineering Economics
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1. Describing Project Cash Flows
Contemporary Engineering Economics
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ORGANISING 组织
Chapter 4
1. Describing Project Cash Flows
Loan versus Project Cash Flows
• Describing Project Cash Flows •Initial Project Screening Method •Discounted Cash Flow Analysis •Variations of Present-Worth Analysis •Comparing Mutually Exclusive Alternatives
Present-Worth Analysis
Project cash flow
Contemporary Engineering Economics
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ORGANISING 组织
Chapter 4
（1）Loan versus Project Cash Flows
• Describing Project Cash Flows •Initial Project Screening Method •Discounted Cash Flow Analysis •Variations of Present-Worth Analysis •Comparing Mutually Exclusive Alternatives
F P r m i (1 ) 1 P m
Contemporary Engineering Economics
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Chapter 3. Understanding Money and Its Management
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4. Effective Interest Rates per Payment Period
P r e s e n t - Wo r t h A na l y s i s
J. Liang 4-1
1. Interim Go-Over
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Chapter 3. Understanding Money and Its Management
P161
1. Nominal Interest Rates
• Describing Project Cash Flows •Initial Project Screening Method •Discounted Cash Flow Analysis •Variations of Present-Worth Analysis •Comparing Mutually Exclusive Alternatives
• Payback Period – 投资回收期 • Conventional Payback Period – 静态投资回收期 • discounted payback Period – 动态投资回收期 • Salvage Value –残值 • minimum attractive rate of return (MARR) – 最低吸引力收益率（基准 收益率） • Net Present Value – 净现值 • the internal rate of return – 内部收益率
4-9Leabharlann 1. intro2. Time Value of Money
Roadmap
3. Money Management
Chapter 4. Present-Worth Analysis
4. Present Worth 5. Annual Worth 6. Rate-of-Return 7. Project Cash Flows 9. Economic Analysis
P200
6. Investment Basics
In each case, the right investment is a balance of three things: liquidity, safety, and return. Liquidity: How accessible is your money?
Return: How much profit will you be able to expect from your investment?
Contemporary Engineering Economics
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3. Chapter 4
Contemporary Engineering Economics
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2. Effective Annual Interest Rates
Suppose you deposit $10,000 in a savings account that pays you at an interest rate of 9% compounded quarterly.
The effective annual interest rate is the one rate that truly represents the interest earned in a year.