Handbook of Reliability, Availability, Maintainability and Safety in Engineering Design - Part 35 studies the combination of various methods of designing for reliability, availability, maintainability and safety, as well as the latest techniques in probability and possibility modelling, mathematical algorithmic modelling, evolutionary algorithmic modelling, symbolic logic modelling, artificial intelligence modelling, and object-oriented computer modelling, in a logically structured approach to determining the integrity of engineering design. . | Theoretical Overview of Availability and Maintainability in Engineering Design 323 where Yt the net cash flow at the end of period t. In applying NPV the net cash flows are usually available as input data which are assumed to occur instantaneously at the ends of the periods t. Also usually known is an estimate of the discounting rate i to be used. Under these conditions finding the NPV is straightforward. The result is a point estimate of a single value at a particular interest rate i. While the point estimate of NPV is informative in that one can determine if it is positive negative zero or indeterminate the behaviour of the criterion as a function is more informative. For the case of unconstrained assumptions concerning project acceptance the general rule is to accept the project if the NPV is positive. This is true when the present value of the cash inflows exceeds the present value of the cash outflows Bussey 1978 . The NPV decreases with increasing discount rate. This is true of any project for which the cash flow increases on average throughout the project. Secondly if the cash flow is negative in the first part of the project as is true of any project requiring an initial capital investment there exists some discount rate for which the NPV becomes zero. This is known as the internal rate of return IRR . The IRR constitutes the most useful single characterisation of the financial viability of a project. It represents the break-even discount rate that will just allow repayment of the initial investment. If the actual discount rate . interest rate plus any other related financial charges is less than the IRR a profit will result. However if the discount rate is higher than the IRR the NPV will be negative and the project will result in a loss prompting the need for redesign of critical systems of the proposed engineered installation or outright rejection of an engineering project s particular technology or even of the project itself. In the alternative .
