Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 10, Problem 10P
(a):
To determine
Calculate the benefit cost ratio.
(b):
To determine
Calculate the new benefit cost ratio.
(c):
To determine
Reason for same ranking.
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What is the B/C Ratio for a firm considering an investment in a new manufacturing technology? Investment = $2,500,000 Salvage Value = $150,000 MARR = 15%
Net Annual Savings = $600,000 Project Life = 10 years
Please don't just use excel, please show steps..
Explain how the viewpoint established before a public sector analysis is started can turn an estimate from being categorized as a disbenefit to a cost, or vice versa.
Q7.2.
From the following data, use the conventional B/C ratio for a project which has a 20-year life to
determine if it is economically justified. Use an interest rate of 8% per year.
Consequences
To the People
To the Government
Annual benefits = $90,000 per year
First cost = $750,000
!3!
%3!
Annual disbenefits $10,000 per year Annual cost = $50,000 per year
%3D
%3D
Annual savings = $30,000 per year
Chapter 10 Solutions
Engineering Economy (17th Edition)
Ch. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - A retrofitted space-heating system is being...Ch. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
Ch. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Four mutually exclusive projects are being...Ch. 10 - Two municipal cell tower designs are being...Ch. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - You have been requested to recommend one of the...Ch. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26FECh. 10 - Prob. 27FECh. 10 - Prob. 28FECh. 10 - Prob. 29FECh. 10 - Prob. 30FECh. 10 - Prob. 31FE
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- The following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by a nearby river. 1. Do nothing: Damage to the building in a moderate flood is $9,000 and in a severe flood it is $23,000. 2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding with only a $12,000 damage. 3. Protect the building with a one-time initial expenditure of $31,000 so that the building can withstand any flooding with no damage at all. In any year, there is a 19% probability of moderate flooding and a 9% probability of severe flooding. Using a MARR of 6% per year and a service life of 20 years, determine which of the three alternatives is the most economical. (a) Calculate EUAC values for each scenario (use negative numbers for costs) The expected EUAC for the "Do Nothing" alternative…arrow_forwardWhen faced with alternatives having unequal lives, do the following when calculating the benefit-cost ratio. Use an Incremental B/C approach O Compare all alternatives over a common planning horizon O At the end of the planning horizon, provide estimates for residual benefits and salvage values for useful lives beyond the planning horizon O All the mentioned alternativesarrow_forwardThe following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by a nearby river. 1. Do nothing: Damage to the building in a moderate flood is $11,000 and in a severe flood it is $24,000. 2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding with only a $10,000 damage. 3. Protect the building with a one-time initial expenditure of $32,000 so that the building can withstand any flooding with no damage at all. In any year, there is a 19% probability of moderate flooding and a 9% probability of severe flooding. Using a MARR of 6% per year and a service life of 8 years, determine which of the three alternatives is the most economical. (a) Calculate EUAC values for each scenario (use negative numbers for costs) The expected EUAC for the "Do Nothing" alternative…arrow_forward
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- A benefit-cost ratio is showing the relationship between the relative costs and benefits of a proposed project, expressed either in monetary or in qualitative terms. TRUE (or) FALSEarrow_forwardIn computing the B/C ratio, is the annual revenue counted as benefits? Please compute the B/C ratio of MEA 5 and show your solution (not in excel). and explain MARR=12%arrow_forwardIs the Benefit-cost analysis a decision-making tool for systematically developing useful information about the desirable and undesirable effects of public projects?arrow_forward
- 1. If all individual B/C ratios of MEAS are less than 1.00, then the preferred option is to "Do Nothing". 2. The concept of individual projects stems from the B/C ratio each project has to offer. Once it is feasible (i.e., BC > 1), MEAS are born.arrow_forward1. Four independent public sector projects A, B, C and D were evaluated using the B/C ratio. The results were 0.85, 1,24, 0.75 and 0.55, respectively. Which among these projects should you recommend and why? State your assumptions. Explain your answer exhaustively.arrow_forwardThere are five independent projects available to be financed by a certain public institution. The following table shows the annual equivalent benefits and costs of each one: a) the institution wishes to invest money as long as the conventional B/C ratio is at least equal to one. Which alternative should be selected for funding? b) What is the order of the projects, from best to worst?arrow_forward
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