Measured-survival function

R. L. Reul [Chem. Eng. (London), 2.38, CE 120-125 (May 1970)] has defined a parameter, which he calls the measured-survival function (MSF), given by... 

Example 15 Utility-Function Curve Let us sketch a utility-function curve tbat is equivalent to tbe following pattern of measured-survival functions (MSF), wbicb expresses tbe observed strategy of a particular manager wbeu spending an aiitborized annual budget of 1,000,000 ... 

FIG. 9-33 Relationship between measured-survival function, number of payback periods, and contribution efBciency. 

The onset of general inflation does not change the value of the contribution efficiencyT, as can be seen from Eq. (9-119), and it does not affect the value of if the cash flows in Eq. (9-1 IS) are converted to their purchasing power in Year 0. Thus, general inflation does not cause the measured-survival function to change. 

Differential inflation, on the other hand, can affect the measured-survival function. We shall assume, for instance, that the sales price per unit product Cs in Eq. (9-II9) is frozen at a constant level while some or of the production costs are allowed to rise. This causes the value of T to decrease therefore, (MSF) likewise decreases, as can be seen from Eq. (9-117). 

The relationship between the number of payback periods, the contribution efficiency, and the measured-survival function as set out in Eq. (9-117) is plotted in Fig. 9-33. 

Let us consider a project having a contribution efficiency of 0.684 and a payback period of 3 years. Figure 9-33 shows that when two payback periods have elapsed, a measured-survival function of 0.9 has... 

Inflation and the (MSF) By applying the measured-survival-function concept to manufacturing projects rather than to research and development, we can define a modified (MSF) for a given project as... 

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