Hey Everyone! I have a question on the annual worth variable. I know the annual worth is the net present worth multiplied by the capital recovery factor (CRF). Looking in the help window at what the CRF is, I am curious to know for my project if N, or the number of years that goes into this equation is 25 given that my project's lifetime is 25 years. What I am asking is, for my project does the N that goes into the CRF equal 25 years?
Also, just to make sure I understand the annual worth's meaning per the help tab. Does it represent the amount of money used to the amount of money borrowed for the project in equal amounts for each year of the project's lifetime. In other words, does it mean the project will call for $74,872 to be paid back for each of the 25 years of the project to whoever loaned the money?
Lastly, does the discounted payback mean the length of time it will take for the investment to pay for itself after factoring in inflation? Or does it mean the length of time it will take for the investment to pay for itself after factoring in inflation AND the interest rate i.e. the whole discount rate?
Secondly, why does the bottom of the return on investment equation multiply the (Ccap - Ccap,ref) by Rproj? Please see the denominator of the ROI equation to fully understand my question
Thanks so much!
Posted : April 2, 2017 8:39 pm