2009 Volume 58 Issue 3 Pages 82-85
Based on the PIANC PTC-II WG31 report1), the LCM of port structures has been introduced in Japan2)-6). Especially, the two repair options with equal lives at the Kamsar Port are economically compared using the Present Worth (PW) method. In present worth analysis, the PW is calculated at the Minimum Attractive Rate of Return (MARR), which is an inflation-free interest rate. When inflation occurs, the effect of inflation on the PW method must be examined.
Since a present worth comparison involves calculating the equivalent present value of all future cash flows for each option, the PW of the options must be compared over the same number of years and end at the same time. The PW comparison of options with equal lives is straightforward. When options being compared have different lives, the Annual Worth (AW) method of comparing options is often preferred to the PW method, because AW comparison is performed for only one life cycle.
In this report, the effect of inflation on the PW method is considered using the data of the Kamsar Port in the WG31 report, and the application of the PW and AW methods to unequal-life options is shown.
