## 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.

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