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Leland Tarquin Engineering Economy Chapter 12 Independent Projects Budget Limitation
Leland Tarquin Engineering Economy Chapter 12 Independent Projects Budget Limitation
Independent
Projects with
Budget Limitation
Lecture slides to accompany
Engineering Economy
7th edition
Leland Blank
Anthony Tarquin
f C ap it al B udg eting
Objective o e ents using
st m
o n pr o jec t in v
Maximize return o r t h , u s u all y PW
o f w
a specific measure
Note: Discard any bundle with PW < 0; it does not return at least MARR
Solution: Five bundles meet budget restriction. Calculate NCF and PW values
Bundle, j Projects NCFj0 , $ NCFjt , $ SV, $ PWj , $
1 A -25,000 +6,000 +4,000 -5,583
2 B -20,000 +9,000 0 +5,695
Conclusion:
Select projects 3 C -50,000 +15,000 +20,000 +4,261
B and C 4 A, B 45,000 +15,000 +4,000 +112
with max PW 5 B, C 70,000 +24,000 +20,000 +9,956
value 6 DN 0 0 0 0
Projects ranked using different measures, e.g., PW, IROR and PWI, may
select different projects since different measures are maximized