A Note on the Use of DCF for Marine Project Evaluation

Extract

King's observation that a false impression could be gained from long-term savings that do not take account of the time value of money is no doubt true if all aspects and factors of comparative projects are taken into account. However, he must think readers a little naive if he offers his Fig. 3 as a full interpretation of the possible savings from installing the various levels of shipborne automation explored in my recent article. An examination of Section 8 (Cost Equations) will show that the DCF technique was deliberately discarded in order to simplify the argument. In fact, there was an additional note—deleted by the Editor through lack of space—which observed that the appraisal could be based on the assumption that the discount rate was equal to the escalation rate of the savings occasioned by taking into account the rise in wages, victualling, &c. over the equivalent project period.