Beruflich Dokumente
Kultur Dokumente
Minggu 8
Graphical Solutions
Graphical review of an economics situation will help to introduce incremental analysis.. example 1: There were 3 mutually exclusive alternatives : A B C Investment $2000 $4000 $5000 Saving/year 410 639 700 Each alternative has a twenty-year life and no salvage value. If the MARR is 6%, which alternative should be selected?
2
Graphical Solutions(2)
PWbenefit for alternative A = $410(P/A,6%,20) = $ 4703 PWbenefit for alternative B = $639(P/A,6%,20) = $ 7329 PWbenefit for alternative C = $700(P/A,6%,20) = $ 8029 Plotted graphically:
Graphical Solutions(3)
From the figure, we can see that the slope of the line from origin O to A is greater than 6% line (NPW = 0). Thus the rate of return for A is greater than 6%. Slope of line B A is also greater than the 6% line, indicates that the rate of return on the increment of investement also exceeds 6%, thus desirable. But the slope B-C indicates its rate of return is less than 6%, hence, undersirable. We conclude that the A investment is satisfactory as well as the B-A therefore, B is satisfactory. C-B increment is unsatisfactory, so C is undesirable compared to B. Our decision is to select Alternative B.
4
Using example 1, Incremental Rate of Return Analysis : alternative A : 2000 = 410 (P/A,i,20) (P/A,i,20) = 4,878 ; i = 20% alternative B : 4000 = 639 (P/A,i,20) (P/A,i,20) = 6,259 ; i = 15% alternative C : 5000 = 700 (P/A,i,20) (P/A,i,20) = 7,143 ; i = 12,8 %
2.
3.
4.
Be sure all the alternatives are identified (Optional) Compute the rate of return for each alternative Arrange the remaining alternatives in ascending order of investment Make a two-alternatives analysis of the first two alternatives
8
Take the preferred alternative from step 4, and the next alternative from the list created in step 3 Continue until all alternatives have been examined and the best of the multiple alternatives has been identified
Example : Tahun Alt.1 Alt.2 0 -$10 -$20 1 + 15 + 28 PWbiaya $10 $20 Pwuntung 14,15 26,42
10
11
12
some situation, a rate of return analysis is easier to explain to people unfamiliar with economic analysis. At other time, an annual cash flow analysis may be easier to explain Business enterprise generally adopt one, or most two, analysis techniques for broad categories of problem.
14