Developing the cash flow for each alternative in a study is a pivotal, and usually the most difficult, step in the engineering economic analysis procedure. An integrated approach for developing cash flows includes three major components: (1) a work breakdown structure (WBS) definition of the project, (2) a cost and revenue structure that identifies all the cost and revenue elements involved in the study, and (3) estimating techniques (models). Discuss the concept of equivalence - if two cash flows (or a series of cash flows) are equivalent for a stated interest rate, and under what circumstances you would be willing to trade one for the other.
How exactly would I know when to trade for a stated interest rate?