Answer to Question #258977 in Accounting for jess

Question

Determine which of the following independent projects should be selected for investment if $315,000 is

available and the MARR is 10% per year. Use the PW method to evaluate mutually exclusive bundles

to make the selection.

Answer 1

Present worth is an equivalence method of analysis in which a project's cash flows are discounted to a single present value. It is perhaps the most efficient analysis method we can use for determining project acceptability on an economic basis.

Under this approach we should add all the cash flows divided by the MARR in degree of the number of a period:

$PW = -315,000 + CF1/0.1 + CF2/0.1^2 +... +CFn/0.1^n.$