Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 16, Problem 9P
To determine
Calculate the benefit cost ratio.
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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..
Calculate the modified and conventional B-C Ratio using AW in four decimal places. Is the project acceptable?
Three mutually exclusive projects are being considered by Sesame Street Productions (SSP). The project details are provided in the table below. SSP has heard about your excellent analysis
skills and wants you to help them make a decision. Use a B/C analysis. SSP uses a MARR of 8%.
Calculate the B/C Ratio for each project and enter your answers with two decimal places as 1.23. If there is a zero before the decimal, you must enter it as 0.12.
Project A
Project B
Project C
SSP may eliminate project
SSP must choose project
Just enter the Project name as A, B, or C.
Initial Cost
Annual Benefits
Project life (years)
B/C Ratio
$500
based on the B/C Analysis.
$150
2
without performing an incremental analysis.
$450
$150
4
$600
$200
4
Chapter 16 Solutions
Contemporary Engineering Economics (6th Edition)
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Similar questions
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- Don't use Ai. Answer in step by step with explanationarrow_forwardConsider the two mutually exclusive projects described in the table below. (Note: Each part of the question requires a written answer.) a) Assuming 9% minimum attractive rate of return (MARR), should either of the two projects be accepted? Why? b) Assuming 16% MARR, should either of the two projects be accepted? Why? c) For any positive value of the MARR, divide the possible MARR values into ranges with different decisions; describe and discuss what decision would be made in each range and why. You will need to calculate the crossover rate to determine the precise MARR where the decision changes. Include an NPV profile table and chart to illustrate your answer. Year 0 1 2 3 4 5 Cash Flow Cash Flow Project A Project B -450,000 -700,000 200,000 200,000 150,000 200,000 100,000 200,000 100,000 200,000 75,000 200,000arrow_forwardConsider a piece of equipment that has the following cost and benefit estimates, and the interest rate is 15% per year: Initial investment: $200,000 Equipment life: 10 years Salvage value: $10,000 Annual receipts: $100,000 Annual expenses: $50,000 What is the modified B/C ratio of this equipment? Click the icon to view the interest and annuity table for discrete compounding when = 15% per year. Thr modified cost-benefit ratio is (Round to two decimal places.) According to the B-C ratio method, the project is More Info Single Payment Compound Amount Present Factor Worth Factor To Find F To Find P Discrete Compounding; /= 15% Compound Amount Factor To Find F Uniform Series Sinking Present Capital Recovery Worth Factor To Find P Fund Factor To Find A Factor To Find A Given P Given F Given A Given A Given F Given P N FIP P/F F/A PIA A/F A/P 1 1.1500 0.8696 1.0000 0.8696 1.0000 1.1500 2 1.3225 0.7561 2.1500 1.6257 0.4651 0.6151 3 1.5209 0.6575 3.4725 2.2832 0.2880 0.4380 4 1.7490 0.5718…arrow_forward
- Identify the special cash flow category for each of the following. While developing a new product line, Cook Company spent $3 million two years ago to build a plant for a new product. Ultimately that project was not pursued. You are now evaluating a new project and would locate production inside of this building. What type of cash flow is the cost of the building? You hope to increase membership at your yoga studio by opening a smoothie bar inside of the yoga studio. When considering the feasibility of the smoothie bar, what type of cash flow is the increased studio membership? Suppose Walker Publishing Company is considering bringing out a new finance text whose projected revenues include some revenues that will be taken away from another of Walker's books. What type of cash flow are the lost sales on the older book? You currently operate a taco truck but are considering converting the food truck into a bubble tea truck. What type of cash flow are the profits currently earned…arrow_forwardEaton Medical Services is evaluating 10 independent indivisible projects, all with positive NPV. The company's capital budgeting for the year is limited to a maximum of $5,000,000. (A) Use solver to find the optimum combination of projects the company should accept, under the assumption that A and B are mutually exclusive and one of them has to be selected. (B) Ignore the constraint from previous part, assume that project “I” has to be accepted. Use solver to find optimum combination of projects the company should accept now. Please show all steps to compute in excel using solver to get to the right answers. Thank you in advance, will upvote! Project Cost NPV A 1,061,191 122,737 B 561,758 58,102 C 1,647,849 280,660 D 1,026,020 89,365 E 191,870 17,568 F 1,333,625 76,960 G 3,102,642 123,240 H 275,568 79,367 I 2,044,070 60,506 J 1,017,567 56,690arrow_forwardThe city of Oakmont is interested in developing some lake front property into a sports park (picnic facilities, boat docks, swimming area, etc.). A consultant has estimated that the city would need to invest $3 million in this project. In return, the developed property would return $500,000 per year to the city through increased tax revenues and recreational benefits to the public. What would the life of this project need to be in order to be cost-beneficial to the city? The interest rate on municipal bonds is 4% per year. E Click the icon to view the interest and annuity table for discrete compounding when i= 4% per year. The life of the project needs to be at least years in order to be cost-beneficial to the city. (Round up to the nearest whole number.)arrow_forward
- A community public works project will cost $92,000 and will benefit five different individuals. Individual Individual Benefit ($) Individual Cost ($) 1 4,500 6,000 2 18,500 15,000 3 19,000 17,000 4 30,000 24,000 5 29,000 30,000 Does this project meet the Pareto efficiency improvement criterion? If possible, revise the cost shares to allow the project to meet the Pareto criterion and to pass a referendum. please use excel with formulasarrow_forward1)what is the best project based on simple payback 2) What is the best project based on discounted payback 3)What is beta B/C ratio 4) What is gammas B/C ratioarrow_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_forward
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