|
|
|
|
Mutually exclusive alternatives is a fancy name for alternatives from which one alternative needs to be selected based on economic analysis. Discussion on alternative analyses has already been provided earlier in the context of Present Worth (PW) analysis. The principles used in alternative analyses for the AE method is similar to that used in PW analysis. As before the analysis period can be equal to project lives or be different from them. When project lives are different, the AE method provides special advantages, if the service of the alternative is required on a continuing basis and each alternative is replaced by an identical asset if replacement is needed over the common analysis period. The common analysis period is the least common multiple period among the competing alternatives. When these conditions are satisfied, the AE analysis for each project can be conducted over its life span and not over the common multiple period as required in the PW method. Example 8.9 illustrates this case. |