The estimated present cost to start a proposed municipal government project is $5,500,000. The annual operation cost of the project is $70,000. The estimated benefits from this project to the public are $470,000 per year, and the estimated existing disbenefits are $100,000 per year. The project has an estimated life of 20 years. a) Calculate the modified B/C ratio at an interest rate of 6% per year, and determine if it is economically justified. b) Calculatetheprofitabilityindexataninterestrateof6% peryear.

The estimated present cost to start a proposed municipal government project is $5,500,000. The annual operation cost of the project is $70,000. The estimated benefits from this project to the public are $470,000 per year, and the estimated existing disbenefits are $100,000 per year. The project has an estimated life of 20 years. a) Calculate the modified B/C ratio at an interest rate of 6% per year, and determine if it is economically justified. b) Calculatetheprofitabilityindexataninterestrateof6% peryear.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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