Final answer:
To calculate PW and EAW/EAC in Excel, use the PV formula for each time period and sum up the values for PW. For EAW/EAC, utilize the PMT function with the calculated NPV. These calculations are essential tools for various decision-making processes.
Step-by-step explanation:
To calculate the Present Worth (PW) and Equivalent Annual Worth (EAW) or Equivalent Annual Cost (EAC) in Excel during a life cycle cost analysis, you would use present value and annuity formulas. Assuming a 15% interest rate, the present worth of a future amount can be calculated with the formula PV = FV / (1 + r)n, where FV is the future value, r is the interest rate per period, and n is the number of periods.
First, you would calculate the present value for each time period when you expect to receive benefits or incur costs. For EAW or EAC, you need to calculate the equivalent uniform annual cost or benefit of an investment, which can be done by using the PMT function in Excel, incorporating the net present value you have calculated. To finalize the PW, sum up all the present values for the different time periods.
Other Applications of present discounted value illustrate its importance in decision-making across various sectors such as businesses evaluating capital investments, governments considering infrastructure improvements, and environmental policy analysis.