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Treatment of Uncertainty
A final issue concerns the treatment of uncertainty. One method for explicitly introducing risk considerations…
Posted inEngineering Economics
Selection of Best Alternative
There are two considerations in determining benefit-cost criteria. The first pertains to project acceptability, while…
Posted inEngineering Economics
Measurement of Benefits and Costs
Direct losses are measured or estimated statistically or by a priori judgment. Actuarial fire-loss data…
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Identification of Relevant Benefits and Costs
The identification of benefits and costs depends on the particular project under consideration. Thus, in…
Posted inEngineering Economics
Benefit-Cost Analysis
Benefit-cost analysis, also referred to as cost-benefit analysis, is a method of comparison in which…
Posted inEngineering Economics
Rate of Return
Rate of return is, by definition, the interest rate at which the present worth of…
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Annual Cost
To compare alternatives by annual cost, all cash flows are changed to a series of…
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Present Worth
In a present worth comparison of alternatives, the costs associated with each alternative investment are all converted…
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Inflation and the discount rate
Provision for inflationmay be made in two ways: (1) estimate all future costs and benefits…
Posted inEngineering Economics
Discount Rate
The term discount rate is often used for the interest rate when comparing alternative projects or strategies.…