Basics Of Engineering Economy
2nd Edition
ISBN: 9780073376356
Author: Leland Blank, Anthony Tarquin
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Cost-effectiveness analysis (CEA) differs from benefit/cost analysis (B/C) in that: (a) CEA cannot handle multiple alternatives (b) CEA compares alternatives on the basis of a specific outcome rather than solely on monetary units (c) CEA cannot handle independent alternatives (d) CEA is more time consuming and resource intensive
A local government is considering promoting tourism in the city. It will cost$8,000 to develop a plan.111e anticipated annual benefits and costs are as follows:Annual benefits: Increased local income and tax collections $ 125,000Annual support service: Parking lot expansion, restroom. $50,000the patrol car, and street repairIf the city government uses a discount rate of 8% and a study period of fiveyears. is this tourism project justifiable according to the benefit-cost analysis?
Why should the government conduct a rigorously benefit-cost analysis of the project?
Chapter 7 Solutions
Basics Of Engineering Economy
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- ____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.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_forwardWhat are the pros and cons of using an environmental impact analysis, an economic impact analysis, or cost-effectiveness analysis? Thank you!arrow_forward
- Identify the viewpoint (e.g., budget, government unit, citizen, business owner), and categorize the following cash flows as a benefit, disbenefit, or cost: (a) $600,000 annual income to area businesses from tourism created by new freshwater reservoir/ recreation area (b) $450,000 per year for repainting of bridge across the Mississippi River (c) $800,000 per year maintenance by containership port authority (d) Loss of $1.6 million in salaries for border residents because of strict enforcement of immigration laws (e) Reduction of $600,000 per year in car repairs because of improved roadways ( f ) Expenditure of $350,000 for guardrail replacement on freeway (g) $1.8 million loss of revenue by farmers because of highway right-of-way purchasesarrow_forwardWhich of the following DOES NOT agree with the definition/description of B/C ratio? A. B/C ratio can have a value less than 0, but the project is not economically feasible. B. A B/C ratio less than 1 means that the benefits are inferior of the costs. C. If conventional B/C ratio is less than 1, so does the modified B/C ratio. D. If the annual costs = annual benefits, the conventional and modified B/C ratios are equal to 0. E. None of thesearrow_forwardA local government is considering promoting to urism in the city. It will cost$8,000 to develop a plan. The anticipated annual benefits and costs are as follows:Annual benefits: Increased local income and tax collections $ 125,000Annual support service: Parking lot expansion, rest room. $50,000patrol car, and street repairIf the city government uses a discount rate of 8% and a study period of fiveyears. is this tourism project justifiable according to the benefit-cost analysis?arrow_forward
- Which of the following DOES NOT agree with the definition/description of Benefit-Cost ratio?A. Benefit-Cost ratio can have a value less than 0, but the project is not economically feasible.B. A Benefit-Cost ratio less than 1 means that the benefits are inferior of the costs.C. If conventional Benefit-Cost ratio is less than 1, so does the modified Benefit-Cost ratio.D. If the annual costs = annual benefits, the conventional and modified Benefit-Cost ratios are equal to 0.arrow_forwardCalculate the modified and conventional B-C Ratio using AW in four decimal places. Is the project acceptable?arrow_forwardIn which way(s) is Sen’s (1970) impossibility theorem of project choice superior or inferior to the conventional Cost-Benefit Analysis principles of project choice based on the Hicks-Kaldor compensation test. Following the discovery and production of oil in commercial quantities in Ghana, the government of Ghana in collaboration with other stakeholders in the oil industry endeavors to establish a fertilizer production plant in Takoradi to take advantage of the by-product from crude oil production. As a potential Cost Benefit Analyst, list all the possible benefits and costs associated with the fertilizer plant project; direct, indirect, tangible and intangible, pecuniary and non-pecuniary.arrow_forward
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