Economic Evaluation & Investment Decision Methods

This textbook is an introduction to the concepts of the time value of money and related decision criteria used to evaluate investments. Application of the criteria in before-tax and after-tax investment situations provides better understanding of the three steps of economic evaluations which include: 1) defining the options unique to an investment decision, 2) analyzing the economically equivalent measure of profit or cost potential for each option and, 3) properly interpreting the results. Measuring the economic equivalence of different investment opportunities means properly addressing the relevant time value of money considerations and other factors such as inflation and taxes to name a few. A person may have a good understanding of the alternatives, make a proper setup and analysis of the evaluation model, and then improperly interpret results. The text examples and problems in each chapter are designed to provide the reader with a comprehensive approach to evaluating the economic equivalence of both income-producing and service-producing alternatives. This is what led to the text title, Economic Evaluation and Investment Decision Methods.