Mg6863 Engineering Economics Unit Iii
Mg6863 Engineering Economics Unit Iii
Mg6863 Engineering Economics Unit Iii
UNIT III
TYPES:
• REVENUE DOMINATED
Positive sign- Cash flow diagram, the profit, revenue,
salvage value
Negative sign – Initial Expenditure
• COST DOMINATED
Positive sign- Principal Amount – Initial Expenditure
Negative sign – Cash flow diagram, the profit, revenue,
salvage value
REVENUE DOMINATED
• REVENUE DOMINATED
FW (i%) = -P(F/P,i,n)+ A(F/A,i,n) + S
• COST DOMINATED
FW (i%) = P(F/P,i,n)+ A(F/A,i,n) – S
Initial Value of A & B (for year 0) is in negative because P must be –ve for Revenue
generated problems.
Revenue generated for the forthcoming years are mentioned in +ve for these problems
• A man owns a comer plot. He must decide
which of the several alternatives, to select in
trying to obtain a desirable return on his
investment. After much study and calculation,
he decides that the two best alternatives are as
given in the following table. Evaluate the
alternatives based on the future worth method
at i=12%.
• M/S Krishna Castings Ltd. is planning to replace its
annealing furnace. It has received tenders from
three different original manufacturers of annealing
furnace. The details are as follows. Which is the best
alternative based on future worth method at i=20%.
ANNUAL EQUIVALENT METHOD
• REVENUE DOMINATED
• COST DOMINATED