Assume an alternative has a 3-year life and that you calculated its AW value over its 3-year life cycle. If you were asked to provide the AW value of the alternative for a 4-year study period, is the AW value you calculated for the alternative’s 3-year life cycle a valid estimate of the AW over the 4-year study period? Why or why not?
What will be an ideal response?
The estimate obtained from the three-year AW would not be valid, because the AW
calculated over one life cycle is valid only for the entire cycle, not part of the cycle. Here the
asset would be used for only a part of its second 3-year life cycle.
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