Pricing
50/3335–8FE Reference Handbook 10.4 · Engineering Economics · NPW
1. Simple Interest2. Single-Payment Compound Amount (F/P)3. Single-Payment Present Worth (P/F)4. Uniform-Series Compound Amount (F/A)5. Sinking-Fund Factor (A/F)6. Capital-Recovery Factor (A/P)7. Uniform-Series Present Worth (P/A)8. Effective Interest Rate9. Arithmetic Gradient Present Worth (P/G)10. Net Present Worth11. Benefit–Cost Ratio12. Straight-Line Depreciation13. Geometric Gradient Present Worth14. Capitalized Cost (Perpetual PW)15. Payback Period16. Break-Even Quantity17. Equivalent Uniform Annual Worth18. Internal Rate of Return vs MARR19. MACRS Depreciation20. Declining-Balance Depreciation21. Inflation and Real Interest22. Expected Value of Alternatives

Handbook formula

Net Present Worth

Bring every cash flow to time 0 at MARR i. Select the alternative with the largest NPW (or NPW ≥ 0 for a single project). Same ranking as EUAW when n is equal.

Initial investment (positive cost)
Net cash flow at time t
MARR

Step-by-step solved example

Project: −$5,000 now, +$2,000 at EOY 1, +$4,000 at EOY 2. MARR = 10%. Accept?

−P123+Fn
All cash flows discounted to t = 0. Accept if NPW ≥ 0.

  1. 1. Discount

    PW inflows = 2000(0.9091) + 4000(0.8264) = 1818 + 3306 = 5124.

  2. 2. NPW

    NPW = −5000 + 5124 = +$124 ≥ 0 → accept.

Answer: NPW = +$124 · accept

10 practice questions

0/10 correct

1.A project is acceptable at MARR if NPW is

2.Among mutually exclusive projects of equal life, choose

3.NPW uses i equal to

4.If NPW = 0, the project's IRR is

5.Do-nothing NPW is

6.Unequal lives: NPW comparison needs

7.Taxes and depreciation enter NPW through

8.Changing MARR from 8% to 12% typically makes NPW

9.Salvage at end of life is included as

10.NPW and EUAW select the same alternative when