Engineering Economics

Annual Worth

A project’s cash flows expressed as an equivalent uniform amount per year at the interest rate.

Annual worth converts every cost and benefit of an alternative into one equal payment per year over its life, usually by finding the present worth and multiplying by the capital recovery factor (A/P, i, n). The alternative with the higher annual worth — or the lower equivalent annual cost — is preferred.

Its particular strength is comparing alternatives with different lives. Annual worth assumes each alternative is repeated identically, so a 10-year option and a 15-year option can be compared directly, without building a 30-year study period as present worth would need.

How much of the FE Civil exam is Engineering Economics?