AMIS 525 example:

Long-run Project Evaluation four year project

SIMPLE INVESTMENT MODEL [ANNUITY FLOWS] C = cost F = operating flow regular t annual flow 0 - C0 1 +F 2 +F 3 +F 4 +F SIMPLE INVESTMENT MODEL [NOT ANNUITY FLOWS] C = cost F = operating flow regular t annual flow 0 - C0 1 + F1 2 + F2 3 + F3 4 + F4 COMPLEX INVESTMENT MODEL [ANNUITY FLOWS] irregular one-time flows: working capital (WC), maintenance (M), and salvage value (SV) C = cost F = operating flow

regular irregular t annual flow one-time flow 0 - C0 - WC0 1 +F 2 3 4 +F +F +F + SV4 + WC4 evaluate as an annuity evaluate as single amounts - M2

all flows - C0 - WC0 +F +F - M2 +F +F + SV4 + WC4

COMPLEX INVESTMENT MODEL [NOT ANNUITY FLOWS] irregular one-time flows: working capital (WC), maintenance (M), and salvage value (SV) C = cost F = operating flow all flows combined
A0 A1

regular irregular t annual flow one-time flow 0 - C0 - WC0 1 + F1 2 3 4 + F2 + F3 + F4 + SV4 + WC4 - M2

all flows - C0 - WC0 + F1 + F2 - M2 + F3 + F4 + SV4 + WC4

A2 A3

A4

evaluate as single amounts

1/9/2014