CHAPTER 5
Methods for Making Economy Studies
5.1 INTRODUCTION
Engineering or business projects require huge capital investments. Economy studies are necessary to be conducted to establish whether a proposed capital investment and its associated expenditures can be recovered over time in addition to a return on the capital that is attractive in view of risks involved and opportunity costs of the limited funds. The concepts of interest and money-time relationships of Chapter 4 are quite useful in arriving at the investment decision.
Since different projects involve different patterns of capital investment, revenue or savings cash flows and expenditure or disbursement cash flows, no single method is perfect for making economy studies of all types ...
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