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Cost Engineering: Time Value of Money

By Alfred Chiu |

Deciding whether to put a project on the fast track entails risks. Some observations are presented here to help minimize risks and maximize profits Time is money!” my mother used to tell me, whenever she caught me reading comic books or staring at the TV. That was the warning for me to get back to doing something with monetary or socially redeeming value. My solution to this problem was to do the required tasks as quickly as possible. I guess that is why today, I want to run all of my projects on a fast track. I want to have that extra time, to go back to reading. Of course in the grown-up business world, more time to sit around is a poor reason for putting a project on the fast track. A better justification is needed for the potential added expense and the certainty of increased risk of taking that route. The question that must be answered is how much “time” is really worth for each project. How much can one save by completing a project sooner or, alternatively, starting a project later to achieve the same end date. The answer to these questions began to appear at the end of the 1800s [1]. A method that is known today as net present value (NPV) was developed, which finally allowed engineers, businessmen and government agencies,…
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