Engineering Economy Investment Decision Methods (Slides)
23 Pages Posted: 25 Jan 2011 Last revised: 26 Feb 2013
Date Written: March 29, 2011
In this chapter we deal with the popular methods for appraising investments: the Net Present Value NPV, the Internal Rate of Return IRR and the profitability Index or Benefit Cost Ratio B/CR. We use intensively the spreadsheet.
We also present critically a popular method ie the Payback Period that does not take into account the time value of money, TVM. We show alternatives to improve the tool while preserving its feature of taking into account the risk.
Keywords: Net Present Value, NPV, Internal Rate of Return, IRR, Profitability Index, Benefit Cost Ratio B/CR, Payback Period
JEL Classification: G31
Suggested Citation: Suggested Citation