HW7_Profitability Measures (PW, FW, AW)_EngEconomics

The three most commonly used profitability measures are present worth (PW), future worth (FW), and annual worth (AW). Each measure provides a different perspective on the profitability of an investment, and engineers can use them in combination to make informed decisions about the use of resources. Present worth (PW) is the value of all future cash flows of an investment at the present time. Engineers use the present worth factor to calculate the present worth of an investment, taking into account the time value of money and the interest rate. A positive present worth indicates that the investment is profitable, while a negative present worth indicates that the investment is not profitable. Future worth (FW) is the value of all cash flows of an investment at a future point in time. Engineers use the future worth factor to calculate the future worth of an investment, taking into account the time value of money and the interest rate. A positive future worth indicates that the investment is profitable, while a negative future worth indicates that the investment is not profitable. Annual worth (AW) is the equivalent annual cash flow that would provide the same value as the investment over its life. Engineers use the annual worth factor to calculate the annual worth of an investment, taking into account the time value of money and the interest rate. A positive annual worth indicates that the investment is profitable, while a negative annual worth indicates that the investment is not profitable.