Planning Horizon and MARR in Engineering Economics

This document discusses the planning horizon and minimum attractive rate of return (MARR) in engineering economics. The planning horizon is the length of time over which an investment is expected to generate cash flows. The MARR is the minimum rate of return that an investor requires on an investment in order to make it worthwhile.

Questions

• What is the planning horizon?
• What is the MARR?
• How do the planning horizon and MARR affect engineering economic analysis?

Answers

• The planning horizon is the length of time over which an investment is expected to generate cash flows.
• The MARR is the minimum rate of return that an investor requires on an investment in order to make it worthwhile.
• The planning horizon and MARR affect engineering economic analysis by determining the present value of future cash flows. For example, if the planning horizon is long, the present value of future cash flows will be lower because the money will have more time to grow. Similarly, if the MARR is high, the present value of future cash flows will be lower because the investor requires a higher return on their investment.