1. Alternative Selection Construction Engineering 221 Economic Analysis

2. Alternative Selection Methods for comparing alternatives: –Present worth method- best suited for: Same function Mutually exclusive Equal lives Creating a rank order of values Rules are probably not as rigid as the book states

3. Alternative Selection Methods for selections –Capitalized cost Similar to present worth Use for “infinitely lived” assets Discount actors approach i when n is large Used for large engineering projects Compare maintenance costs of highways, dams, etc

4. Alternative Selection Methods for selection –Annual cost method Similar purpose Unequal lives Infinite renewal Can generate a desirability ranking Also called capital recovery method Used in value engineering Coverts all costs to annualized amount (EUAC)

5. Alternative Selection Method for selection –Benefit-cost ratio When costs and benefits accrue to different groups NPV of all benefits/NPV of all costs regardless of who pays or receives Can be difficult to assign costs and benefits Must have ratio greater than 1.0 to justify project Not generally used to rank alternatives (although it can be) Used primarily in transportation planning

6. Alternative Selection Methods of selection –Rate of Return Method MARR is a standard or constraint Compare actual ROR to MARR Used to narrow number of alternatives tot hose exceeding a pre-set standard return level