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To manage is to forecast and plan, to organize, to command, to coordinate and to control. - HENRI FAYOL

Construction Information Services

Present Worth Calculator

The typical use of Present Worth (Refered to in some text books as (Present Value) calculator is to compare two or more schemes each with a different initial investment and different running costs. For example, a Contractor is comparing two alternative equipment to purchase

First altrenative:
• Initial Cost:£5000
• Running Cost:£500
• Life time:6 years
Second Alternative:
• Initial Cost:£4000
• Running Cost:£800
• Life time:6 years
assuming interest rate 7%

The Present worth of the first alternative is: 7,383 (Try the Present worth calculator below)
The Present value of the second alternative is:7,813 (Try the Present value calculator below)
(fractions ignored above)
Thus since first alternative has smaller present worth, it is said that it is more economic.

What is being compared is the £1000 extra initial investment of the first Alternative, with the £300 extra running costs of the second Alternative
In other words is £1000 now more or less than £300 each year for six years, with obtainable interest rates being 7%?
It is now clear that £1000 now is £430 less than £300 for six years.