Present worth method
Present value method belong to dynamic value of evaluation indexes .The basis idea of present value is
to convert the cost and benefit of scheme to the present value and get its difference value to get the
benefit present value. The scheme economically viable if the value is greater than zero, otherwise not
workable Compare the benefit present value of every scheme; the largest one is the best solutions [5-7].
The main steps of present value method are listed below:
1. Enumerated plan: list all the possible solutions.
2. Calculation the costs and benefits of each scheme: Choose the same price when calculate the costs .If
considering the price changes, the same rate of inflation should also be adopted.
3. Choose the datum year: The same datum year should be choose for all the schemes.
4. Determine the analysis phase: The same analysis phase should be adopted for all the schemes
5. Determine the discount rates: Unified discount rates should be adopted for all the schemes.
6. Calculate the present worth of costs and benefits of all the schemes.
7. Calculate the net present value of all the schemes.
8. Choose the plan whose net present value is biggest one as the final plan.