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When cash flows occur at equally spaced subperiods during an interest period, computing an approximate future worth is simplified by either assuming the aggregate cash flows occur at the end of the period or continuously throughout the period. This technical note shows that it is also computationally simple to assume that the aggregate occurs at the mid-point of the period, and the resulting approximation is better for commonly encountered interest rates and number of subperiods.

This paper addresses the loan environment in which (a) the asset funded by the loan serves as collateral for the loan, (b) the funded asset decreases in value over the period of the loan at a known constant rate, and (c) the loan is repaid in a finite number of equal end-of-period payments. Of particular concern are the conditions under which the value of the collateral may be less than the unpaid principal during the loan period, thereby creating an unwelcome situation for the lender. The loan interest rate is determined such that the unpaid loan principal is at all times equal to or smaller than the current market value of the collateral.

The present worth (PW) and future worth (FW) decision criteria are to be found in virtually all current engineering economy textbooks. Although the relationships between the internal rate of return (IRR) criterion and PW has been widely discussed in the literature, there remains some misunderstanding as to similar relationships between PW and FW. Of particular importance is the interest rates at which PW and FW are maximized. It is shown here that the maximizing rates are not necessarily equal. This leads to the seemingly peculiar result that a change in the discount rate may decrease the PW while at the same time increasing the FW, or vice versa. Numerical, mathematical and intuitive arguments are presented.

In a research program aimed at the assessment of more comprehensive accident analysis methods, new applications of statistical analysis procedures to commercial vehicle accidents have been investigated, and exemplary results obtained [Philipson et al., 1978], A file of some 3000 specially-detailed California Highway Patrol accident reports from two areas of California during a period of about one year in 1975-1976 provided the unique data base for the application. Computer implementation and evaluation through statistical testing of the quality of the data file were first accomplished. Then an exhaustive univariate analysis of the data was conducted to describe the file in detail. Selected sets of dependent and independent variables were then subjected to analyses of association employing contingency table analysis methods. In several cases, acceptable log-linear models to explain the variables' association were thereby established. Vehicle exposure measured in vehicle miles traveled for each vehicle category was introduced into one of the analyses to assess its impact on the set of significant interactions; it was indeed found to be important, albeit accuracy in its estimation was problematical. This estimation was carried out by two independent methods; a "direct" procedure based on a series of linear extrapolations of basic State of California commercial vehicle traffic data, and an "induced" estimation procedure essentially employing only data in the accident reports. The results of the two methods exhibited some common trends, but otherwise differed considerably. The results of the research effort, highlighted in this article, indicated the value of the methods investigated, and so of the detailed accident report files necessary for their use. They also strongly illuminated the areas of greatest difficulty in the application of these methods, basically associated with accident data quality and exposure estimation accuracy, and general directions for their improvement.

The net present value (NPV) of a serially correlated cash-flow profile is examined. Given the expert estimates of end-of-period cash-flows, which are assumed to be beta variates, a methodology is developed to determine the first four moments of the profile's NPV. We first determine the moments of the cash-flows, whereby the NPV expectation results readily. Then a correlative model based on time-series analysis is assumed in order to examine the cash-flow dependency; this is required for the determination of higher moments. Subsequently, it is shown that the higher moments of the NPV can be determined from the moments of period cashflows and the time-series parameters. Although the beta-distributed assumption is used to illustrate the methodology, it is not a requirement in this analysis. Indeed, the approach presented in this paper is applicable to a finite cash-flow profile with arbitrarily distributed cash flows, as long as their individual moments can be determined.

Principal income tax consequences of business investment in capital plant and equipment are described for the British territory of Hong Kong and certain East Asian countries: China, Korea, Singapore and Taiwan. Tax effects discussed include “corporate” income tax rates, tax credits and allowable depreciation expenses. Possible effects of allowable depreciation, coupled with local tax rates, are illustrated through a numerical example.

…one cannot desire anything without simultaneously desiring an increased ability to attain it (even if what the person desires is to desire nothing). E.A Singer, Jr.

SUMMARY This paper extends existing quantitative methods for the economic evaluation of alternative investment proposals to the arena of decision-making within economies characterized by inflationary trends. The models developed may be used in transactions involving one or several countries each having a differing rate of inflation.

In addition to measurable economic consequence of an alternative investment decision, there are other important prospective consequences which cannot readily be reduced to a single common denominator stated in money terms. The extant literature of engineering economy almost entirely avoids discussion of the considerable problems which arise when attempts are made to include “irreducibles” formally in analysis, although some progress has been made in recent years in other academic disciplines. This paper, based upon some earlier work for the United States Navy, suggests a technique which can be used to include “irreducibles” along with monetary data in determining relative desirability of mutually exclusive alternative proposals. The logic of the problem and the formal structure of a desirable solution are discussed.