MS Excel Application in Engineering Economic Analysis

MS Excel spreadsheet can be used for carrying out engineering economic analysis such as Present Worth Analysis, Future Worth Analysis and Rate of Return. If cash flows throughout service life of alternatives and other related data is given, MS Excel can be conveniently used to carryout PW and FW analysis. The procedures are as follows:


PRESENT WORTH ANALYSIS
-  PV function is used for this purpose.
-  Syntax:
   =PV(rate, nper, pmt, [fv], [type])
   The PV function syntax has the following arguments:

• Rate    Required. The interest rate per period (i)
• Nper    Required. The total number of payment periods in an annuity (n)
• Pmt    Required. The payment made each period and cannot change over the life of the annuity (A)
• Fv    Optional. The future value, or a cash balance you want to attain after the last payment is made (F)
• Type    Optional. The number 0 or 1 and indicates when payments are due. For end-of-period payment '0' is used while for beginning of period payment '1' is used.

FUTURE WORTH ANALYSIS
-  FV function is used for this purpose.
-  Syntax:
   =FV(rate, nper, pmt, [pv], [type])
   The FV function syntax has same arguments as PV, however, instead of fv, pv is used.

Conclusion:
PV and FV function are quite helpful in making decision regarding a viable alternative. Excel spreadsheet can make our life much easier while carrying out such analysis. A screenshot from an excel file is attached below which demonstrates PW Analysis in Excel.

Fig 1: PW Analysis in Excel