This thesis describes the development of a microcomputer package for analyzing both deterministic and probabilistic cash-flow profiles and comparing economic alternatives. The package consists of five complementary programs: (1) Selection of the better of two alternatives using present-worth evaluations. (2) Conventional rate- of-return computations for a single project. (3) Selection from mutually exclusive alternatives using rate-of-return analysis. (4) Optimal capital allocation among several investment opportunities under risk. (5) Probabilistic after-tax economic analysis for a single project.
All programs but (4) are based on the time value of money. Program (4) is a chance-constrained optimization model utilizing the Lagrange-multiplier technique. Program (5) is the major effort of this thesis: It implements depreciation, debt/equity financing, and taxes and performs a sequential after-tax Monte Carlo simulation over a specified life-span. All engineering economy techniques employed are extensively discussed; the methods used for generating variates are developed in detail; and characteristic examples for all methods used are given throughout the text. The system has been ergonomically designed for user-friendliness. The programming language is Applesoft BASIC.