Question

Compare different evaluation and analysis techniques?

NPV, EUAW, IRR, B/C ratio

Answer 1

NPV or net present value is the value of net cashflows which cash inflow minus outflows and the value is discounted over a period of time. It helps to examine whether a project will be profitable in the future and capital budgeting.

EUAW is acronym of equivalent uniform annual worth. It is the difference between equivalent uniform annual benefits minus respective costs which is the cost of maintenance, operating etc.

IRR stands for internal rate of return which is a measure of return investment like NPV it is used for capital budgeting and finding profitability of project.

B/C ratio is the cost benefit ratio which shows the relationship between costs and benefits of a desired project. It is quantitative in nature and when BCR is greater than one means NPV is positive and it is beneficial to take the project and vice versa when BCR is less than one.