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Annual worth of a project is an equal series of the same amount of money for a period of time (annually) to the cash inflows and outflows at an interest rate that is equal to MARR
This method is sometimes more preferred as compared to the PW of FW methods.
This method covers two items:
- Loss in value asset
- Interest on invested capital
If the AW (i = MARR) equals to or exceeds 0, the project is economically justified (profitable)

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AW (i = MARR) = R - E - CR (i%)

R = annual equivalent revenue or saving
E = annual equivalent expenses
CR = annual equivalent capital recovery

CR = Initial investment, I (A/P, i%, N) - Salvage value at the end of study/ project period, S (A/F, i%, N)

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This method is based on the equivalence concept that all future cashflows are relative to its present worth, by discounting the values with Minimum Attractive Rate of Return (MARR)
A positive NPW means that the equivalent worth of the inflows is more than the equivalent worth of outflows. Therefore, the project is generating profit.

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PW = PW of cash inflows - PW of cash outflows

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Investing RM10.0M in a shopping complex in Ampang
Once built, the mall will contribute RM1,250,000.00 every year for 10 years
MARR = 12%
By the end of the 10-year period, the mall will retain about 60% of the initial investment as a salvage value (book value of an asset after all depreciation has been fully expensed)
Should the company proceed with this investment?

PW (12%) = RM1,250,000.00(P/A, 12%, 10) + 60% x RM10,000,00.00(P/F, 12%, 10) = RM10,000,000.00
PW = RM1,250,000.00(5.6502) + RM6,000,000(0.3220) - RM10,000,00.00
PW = RM282,750
*Therefore, this investment is justifiable as the PW is > 0

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Is based on the equivalent worth of all cash flows and outflows at the end of planning period at an interest rate equals to MARR
If FW (i = MARR) equals to or exceeds 0, the project is economically justified (profitable)

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FW = PW (F/P, i%, N) for FW > 0

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Investment = RM25,000.00
Market value of equipment = RM5,000.00 (at the end of study period)
Study period = 5 years
Increased productivity attributable to the equipment = RM8,000.00
MARR = 20% per year
Should the company proceed with this investment?

FW (20%) = -RM25,000 (F/P, 20%, 5) + RM8,000 (F/A, 20%, 5) + RM5,000.00
FW = RM2,324.80

*This project is economically justified as the FW is more than 0

Calculate the relationship of the PW as a multiple of the equivalent of the FW value

PW (20%) = RM2,324.80 (P/F, 20%, 5) = RM934.29

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One device costs RM10,000 for the 1st year
The project period is 5 years.
Its salvage value is RM2,000
MARR = 10% per year

Calculation: