CIVL202 Construction Engineering I Tutorial 11 T1Mon11:00 – 11:50 T2Wed09:00 – 09:50

Tutorial Outline Present worth method B/C ratio method

Present worth method Present worth =equivalent annual cost/benefit*(P/A, i%, n) Equivalent annual cost/benefit=present worth*(A/P, i%, n) The same conclusion (why?)

B/C (benefit-cost) ratio B/C ratio= equivalent annual total benefits equivalent annual total costs B/C ratio= Present worth of total benefits Present worth of total costs B/C ratio >1, the project is worthwhile, and vice versa

sample A company can hire a machine for an all-inclusive rate of $125 per hour and on average makes use of such a machine for 1600 hours per year. The company is considering purchasing a machine as an alternative to hire and obtain the information given below: Cost of machine=$ Salvage value after 5 year=$ Annual insurance premiums=$3000 Annual tax=$1800 Fuel cost per hour=$50 Oil and grease cost=10% of fuel cost Annual maintenance=$15000 Annual cost of capital=18% Determine whether the company should purchase a new machine or continue to hire.

Formula Uniform series compound amount factor Uniform series sinking fund factor

Formula Present Worth Present worth factor Present worth of F = Uniform series present worth factor