In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are given in the table to the right. a. Which plan(s) should be adopted, if any, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required investment is at least 1.0? b. Suppose that 5% of the costs of each plan are reclassified as disbenefits. What percentage change in the B-C ratio of each plan results from the reclassification? c. Comment on why the rank-orderings in (a) are unaffected by the change in (b). Plan A B с PW ($000s) Costs $125,000 Benefits $139,000 152,000 107,000 137,000 104,000
In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are given in the table to the right. a. Which plan(s) should be adopted, if any, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required investment is at least 1.0? b. Suppose that 5% of the costs of each plan are reclassified as disbenefits. What percentage change in the B-C ratio of each plan results from the reclassification? c. Comment on why the rank-orderings in (a) are unaffected by the change in (b). Plan A B с PW ($000s) Costs $125,000 Benefits $139,000 152,000 107,000 137,000 104,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are given in the table to the
right.
a. Which plan(s) should be adopted, if any, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required investment is at least 1.0?
b. Suppose that 5% of the costs of each plan are reclassified as disbenefits. What percentage change in the B-C ratio of each plan results from the reclassification?
c. Comment on why the rank-orderings in (a) are unaffected by the change in (b).
a. Perform the B-C analysis. Fill-in the table below. (Round to four decimal places.)
Plan
A
B-C ratio
Is the alternative acceptable?
Plan
A
B
с
PW ($000s)
Costs
Benefits
$125,000 $139,000
107.000
152,000
137,000
104,000
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