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What is Annual Worth Analysis Explained about?
1) Annual worth (AW) analysis calculates the net present value of cash flows over one life cycle for a project, rather than over the longest common multiple as in life cycle cost analysis. 2) To calculate AW, the initial investment, salvage value, and annual cash flows are discounted to the present using the interest rate. 3) Projects or alternatives are evaluated based on which has the highest AW value, with positive values indicating the alternative is financially justified.
- Author
- Khuram Maqsood
- Language
- EN