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Abstract: |
In this paper, we introduce the engineering appraising tool, Incremental Analysis (IA), firstly give the definitions and then analyze the economic principles. IA can be defined as the examination of the differences between alternatives, and the concepts of sunk cost and opportunity cost are alternately and repeatedly adopted during IA, which is one of marginal analyses. For its applications, we give three examples, e.g. in the application of Value Engineering (VE), a series of unlimited alternatives, and appraisal dilemmas using different tools. In IA we select the best alternative the same as the result when we use the NPV method, but contrary to the NPV method, IA is a logic tool and easy to understand. Moreover, IA can be used to evaluate alternatives indicated by cardinal units such as monetary units and other ordinal units such as function, effectiveness or utility. So, IA should be adopted firstly in investment analysis, particularly used separately to appraisal the projects.
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