Comparative Analysis (Part I)

Comparative Analysis compares and select the appropriate alternative. The mutually exclusive alternatives with same useful life is compared by payback period method, equivalent worth method, rate of return method, benefit cost ratio method whereas in case of different useful lives, repeatability assumption and co-terminated assumption are used.

Summary

Things to Remember

Comparative Analysis is the study of the value of the project comparing with each other incorporating various related methods to choose the best and viable alternative.
Analysis period is a time span over which the economic effects of an investment will be studied.
Useful life of an asset is the time period during which it is kept in productive use in a trade or business.
Payback period method is the initial project screening method which screens the projects on the basis of how long it takes for net receipts to equal investment outlays.
All equivalent worth method such as present worth, future worth and annual worth gives the same economic ranking of the alternative.
IRR, ERR and BCR are the relative measure so they use incremental analysis to make selection of the alternative.
Repeatability assumption is used when the project's life are different.

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Subjective Questions

Q1:

Define labor .

Type: Short Difficulty: Easy

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Q2:

Explain the stages of labour ?

Type: Long Difficulty: Easy

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Answer:  
Stages of labour
<ul>
<li>First stage</li>
</ul>
It stars from the onset of the labour pain and ends with full dilatation of the cervix. It is also known as the "cervical state" of labour. Its average duration is 11-12 hours in primigravidae and 6-7 hours in multiparae. It has three sub-phase.
<ul>
<li>Latent phase :</li>
</ul>
Contractions are usually every 5-20 minutes, lasting 20-40 sec and of mild intensity and cervix dilates from 0-4 cm. The contraction progress to about every 5 minutes and establish a regular pattern.
 
<ul>
<li>Active phase</li>
<li>Contractions are usually every 2-5 minutes</li>
<li>Lasting 30-50 seconds and mild to moderate intensity</li>
<li>Cervix dilates from 4-7 cm</li>
</ul>
 
<ul>
<li>Transitional phase</li>
<li>Contraction comes every 2-3 minutes</li>
<li>Lasting 50-60 seconds and intensity moderate to strong</li>
<li>Cervix dilates from 8-10 cm</li>
</ul>
 
<ul>
<li>Second stage of labour</li>
</ul>
The expulsion stage (stimulated by prostaglandins and oxytocin) begins when the cervix is fully dilated and ends when the baby is born. Its average duration is 1-2 hours in primigravidae and 5-30 minutes in multiparae.
<ul>
<li>Propulsive phase</li>
</ul>
Starts from full dilatation up to the descent of the presenting part of the pelvic floor.
 
<ul>
<li>Expulsive phase</li>
</ul>
It is distinguished by maternal bearing down effects and ends with delivery of the baby.
 
<ul>
<li>Third stage</li>
</ul>
It begins after the expulsion of the fetus and ends with the expulsion of the placenta and membranes. This stage is also concerned with control of bleeding. Its average duration is about 15-30 minutes in both primigravidae and multiparae. The duration is, however, reduced to 5 minutes in active management.
 
<ul>
<li>Fourth stage</li>
</ul>
It is the stage of observation for at least one hour after the expulsion of the placenta and membranes. During this period, the general condition of the woman and the behavior of the uterus are to be watched carefully.

Q3:

Explain the sign and symptoms of false labor and true labor ?

Type: Long Difficulty: Easy

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Answer: False labour
Three major signs of false labour
<ul>
<li>You don’t have any bloody show: Or you have some vaginal discharge, but it’s brownish instead of blood-tinged or pink. Sex or an internal exam can result in a brown discharge that might seem like your mucous plug dislodging — but it probably isn’</li>
<li>You wake up in a pool of fluid that smells like ammonia, and the flow has stopped: Oops — that’s probably urine, not amniotic fluid, which has no odor. If your water breaks, a liquid will continue to trickle out; you won’t be able to stop it as you would if you were urinating.</li>
</ul>
 
<ul>
<li>You have irregular contractions: Braxton-Hicks contractions can easily fool you into thinking labor has started. But even if you’re a week past your due date, you could still be having false labor contractions, which are usually:</li>
<li>Irregular (they don’t happen at regular intervals)</li>
<li>Not progressive (they don’t get more severe, intense, or frequent with time)</li>
<li>Felt more in the lower abdomen, instead of in the lower back</li>
<li>Responsive to a change in position or activity (if you change positions, they go away — so try lying down on your side to see if the contractions stop)</li>
<li>Accompanied by movement from your baby</li>
</ul>
 
True labour
Features of true labour
<ul>
<li>Labour pain</li>
</ul>
Throughout pregnancy, painless barton hicks contraction with simultaneous hardening of the uterus occur. These contractions change their character, become more powerful, intermittent and are associated with pain. The pain is more often felt in front of the abdomen or radiating towards the thigh.
 
<ul>
<li>Appearance of show</li>
</ul>
With the onset of labour, there is profuse cervical secretion. Simultaneously, there is slight oozing of blood from rupture of capillary vessels of the cervix from the raw decidual surface caused by separation of the membranes due to splitting off the lower uterine segment. Expulsion of cervical mucus plug, mixed with blood is called "show".
 
<ul>
<li>Dilatation of internal os</li>
</ul>
With the onset of labour pain, the cervical canal begins to dilate more in the upper part than in the lower, the former being accompanied by the corresponding stretching of the lower uterine segment.
 
<ul>
<li>Formation of "bag of waters"</li>
</ul>
With the dilatation of the cervical canal, the lower pole of the fetal membrane becomes unsupported and tends to bulge into the cervical canal. As it contains liquor which has passed the presenting part, it is called "bag of water". During uterine contraction with the subsequent rise of intra-amniotic pressure, this bag becomes tense and convex. After the contractions pass off, the bulging may disappear completely. This is almost a certain sign of the onset of labour.

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Comparative Analysis (Part I)

Comparative Analysis is the study of the value of the project comparing with each other incorporating various related methods to choose the best and viable alternative.

Analysis period:

The analysis period is a time span of which the economic effects of an investment will be studied. The analysis period may also be called the study period or planning horizon. The length of the analysis period is determined by company policy, the service period, the useful life of the longer-lived alternative etc.

Useful life:

The useful life of an asset is the time period during which it is kept in productive use in a trade or business.

The useful lives of alternatives being compared relative to the selected analysis period can involve two cases.

Case 1: Project’s Useful lives are the same for all alternatives and equal to the analysis period

Case 2: Project’s Useful lives are different among the alternatives and at least one does not match the analysis period

Comparing Mutually Exclusive Alternatives having same project’s useful life

When the useful lives of alternatives are equal to each other and to the selected study period, adjustments to the cash flow are not required. There are several methods that can be used in this case. They are discussed below.

Payback Period method:

It is the initial project screening method which screens the projects on the basis of how long it takes for net receipts to equal investment outlays. It is simple, fast and eliminates some alternatives. The project does not merit consideration unless its’ payback period is shorter than some specified period. They are of two types: conventional and discounted payback period.

Conventional payback period: Time value of money is not taken into account.

If annual receipts are got to be uniform,

Payback period = Initial Investment / Uniform Annual benefits ……… (1)

If annual receipts vary every year, the payback period is the time at which the cumulative cash flow equals to zero.

Discounted payback period: It considers the time value of money.

In this case, the project with less payback period is chosen as the best alternative. It is not best method because it does not consider the profitability.

Equivalent Worth method:

When this method is used, consistency of alternative selection results from this equivalency relationship. We can find the equivalent present worth (PW), future worth (FW) or Annual worth (AW). These all three methods provide the same economic ranking of mutually exclusive alternatives. The project having the largest value is chosen as the best alternative.

If A and B are two alternatives,

and if PW_A (i) > PW_B (i)

PW_A (i)*[A/P, i, N ] > PW_B (i)*[A/P, i, N ]

AW_A (i) > AW_B (i)

Similarly, PW_A (i)*[F/P, i, N ] > PW_B (i)*[F/P, i, N ]

FW_A (i) > FW_B (i)

This shows that all equivalent method gives same ranking.

Rate of return methods and Benefit Cost Ratio Method:

The equivalent worth method is absolute method whereas IRR and BCR are relative measures so the project with highest IRR, ERR, BCR may not be the preferred alternative. For this purpose, the incremental analysis should be done.

The incremental analysis evaluates the difference or the increment between the two or more mutually exclusive alternatives. When independent projects are evaluated, no incremental analysis is necessary, and each project is evaluated separately and more than one can be selected.

Steps for Incremental analysis:

Identify all the alternatives.
Compute the IRR/ ERR/ BCR of each alternative. Any alternative with IRR < MARR/ ERR < MARR
Order alternatives in increasing order or investment cost to ensure that the increments have cash flow corresponding to investments.
Establish a base alternative having least capital investment.
/ BCR < 1 should be rejected.
Perform an incremental analysis between the base alternative and the alternative with the next higher initial cost. If the incremental IRR ≥ MARR/ ERR ≥ MARR/ BCR ≥ 1, reject the base alternative and accept the higher cost alternative and retain it as a base alternative.
Select the next higher cost alternative and perform the incremental analysis until all the alternatives have been evaluated.

Decision rule:

If IRR_{B – A}> MARR / ERR_B– _A> MARR / BCR_{B – A}> 1, select B (higher first cost alternative)
If IRR_{B – A}= MARR / ERR_B– _A= MARR / BCR_{B – A}= 1, select either one
If IRR_{B – A}< MARR / ERR_B– _A< MARR / BCR_{B – A}< 1, select A (lower first cost alternative)

Comparing Mutually Exclusive Alternatives having different useful lives:

In the previous section, we introduced the simplest scenario possible when analyzing mutually exclusive projects. The project had equal useful lives to each other and to the required service period. In practice, this is the rare case. Often project lives differ from the required analysis period and / or do not match each other. For example, two ^machines may perform exactly the same function but one may last longer than the other, and both of them last longer than the analysis period for which they are being considered. In this section, we will develop and discuss some of the techniques for dealing with these complications. The assumption we make for the economic comparison of such mutually exclusive alternatives are discussed below.

Repeatability Assumption

Two alternatives having different useful service life are changed into projects having same useful life by expanding their life up to the least common year.
The least common multiple is equal to the least common multiple (LCM) of the lives of the given alternatives.
The economic consequences and the cash flow transactions that are expected to happen in an alternative’s initial life span will also happen in all succeeding life span.

For example, if project A has the service life of 4 years and project B has of 6 years. The LCM of 4 and 6 is 12 so we assume the study period to be 12 years. So cash flow of project A is repeated for 3 times to reach 12 years and the cash flow occurred in first 4 years will also happen in succeeding 4 years life whereas cash flow of project B is repeated for 2 times to reach 12 years study period and the succeeding 6 year span also have same cash flow as in initial 6 years.

After the study life is taken to be 12 years, then we can make present worth (PW), future worth (FW) or annual worth (AW) analysis by getting PW or FW or AW for each project. These values are compared and the project with the highest value is chosen as the best alternative. All these analyses method chooses the same best alternative.

BIBLIOGRAPHY:

Chan S.Park, Contemporary Engineering Economics, Prentice Hall, Inc.
E. Paul De Garmo, William G.Sullivan and James A. Bonta delli, Engineering
Economy, MC Milan Publishing Company.
James L. Riggs, David D. Bedworth and Sabah U. Randhawa,Engineering
Economics, Tata MCGraw Hill Education Private Limited.

Lesson

Comparative Analysis of Alternatives

Subject

Civil Engineering

Grade

Engineering

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