ECONOMIC JUSTIFICATIONS

Economic justifications are made to quantitatively analyze the anticipated consequences of capital equipment decisions, to reduce the number of factors that must be considered separately in the final judgment decision, and to provide a common denominator for the comparison of different investment opportunities. They provide the background for the comparative evaluation of all measured and intangible aspects of an investment opportunity. This paper thoroughly explains three evaluation techniques frequently used: the payback period, the MAPI method and the cash flow method. (Formerly SP63-211)