Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Question
Chapter 10, Problem 9P
(a):
To determine
Calculate the benefit cost ratio.
(b):
To determine
Best project.
(c):
To determine
Intangible benefit.
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Students have asked these similar questions
For a complete and correct incremental B/C
analysis method for multiple alternatives,
which of the following does the method NOT
require?
a. Čalculation of the B/C ratio of each
alternative
b. The identification of all relevant alternatives
c. Ranking the order of the projects (smallest
to largest denominator)
d. Calculation of the B/C ratio for incremental
cash flows
There 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?
1. 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.
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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- Indicate true (T) or False (F) _______Results of economic analysis is always the same regardless of which economic evaluation criterion (such as B/C ratio, IRR, etc.) is used. _______Two transportation services are substitutes if their cross elasticities are positive. _______Travel time costs are mainly dependent on the vertical and horizontal alignments. _______User benefits are achieved from an investment option if it reduces total user costs. _______Traffic mobility improvements will always cut back vehicle emissions.arrow_forwardQ7.2. 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 yeararrow_forwardTwo alternatives, identified as X and Y, are evaluated using the B/C method. Alternative Y has a higher total cost than X. If the B/C ratios are 1.2 and 1.0 for alternatives X and Y, respectively, which alternative should be selected? Whyarrow_forward
- a. Based on PW method, Design Z is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design Z is more economical d. The discounted payback period of Design Y is The discounted payback period of Design Z is years (Round to one decimal place) years (Round to one decimal place) Investment cost Annual revenue Annual cost Useful life Salvage value Net PW Therefore, based on the payback period method, Design y would be preferred. (e) Why could the recommendations based on the payback period method be different from the other two methods? ⒸA. because the payback period method ignores the cash flows after the payback period O B. because the payback period gives more weight to the cash flows after the payback period C Design Y Design Z $140,000 $275,000 $57,659 $96.354 $17.618 $31,687 15…arrow_forwardEconomics use excel to solve QUESTION 4 Calculate the modified B/C ratio for the following cash flow estimates of a public project at an interest rate of 2% per year. Initial Cost 600,000 Annual Benefits 125,000 Annual Disbenefits 35,470 Annual O&M costs 25,000 Projected life 20arrow_forward1. 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_forward
- A manager wants to compare between two alternatives by the B/C method; if the overall B/C ratio for both alternatives is calculated to be exactly 1.0, which alternative should the manager select? Select one: a. do nothing alternative b. Select both alternatives c. Select the alternative that has the higher cost d. Select the alternative based on the probability to occurarrow_forward7.7 Calculate the conventional B/C ratio for a county government project that is projected to have the following cash flows: costs of $2,000,000 per year; benefits of $2,740,000 per year; disbenefits of $380,000 per year. 7.8 The Hawaii Department of Transportation has planned a bypass loop that is expected to cost $9,000,000 and save motorists $820,000 per year in gasoline and other automobile-related expenses. However, local businesses will suffer sales losses estimated at $135,000 each year. (a) Calculate the conventional B/C ratio using a discount rate of 6% per year and a 20-year study period. (b) Is the proj- ect economically justified if disbenefits are con- sidered? If disbenefits are not considered? 7.9 A southwestern city that has 170,000 households is required to install treatment systems for the removal of arsenic from drinking water. The an- nual cost is projected to be $50 per household per year. Assume that one life will be saved every three years as a result of…arrow_forwardThe following data is provided for a PPP project. To the People To the Government Benefits $95,000 per year beginning now Cost $1.8 million now and $200,000 every 3 years Disbenefits $25,000 per year Savings $70,000 per year Calculate the conventional benefit/cost ratios using an interest rate of 8% per year and an infinite project period. A) The conventional B/C ratio is ----------- B) The modified B/C ratio is-----------arrow_forward
- The following data is provided for a PPP project. To the People To the Government Benefits $95,000 per year beginning now Cost $1.8 million now and $200,000 every 3 years Disbenefits $60,000 per year Savings $115,000 per year 1--Calculate the conventional benefit/cost ratios using an interest rate of 12% per year and an infinite project period. The conventional B/C ratio is . 2--Calculate the modified benefit/cost ratios using an interest rate of 12% per year and an infinite project period. The modified B/C ratio is .arrow_forwardCalculate the modified and conventional B-C Ratio using AW in four decimal places. Is the project acceptable?arrow_forwardExplain 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.arrow_forward
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