Chapter 7, Problem 49APQ

The estimated annual cash flows for a proposed municipal government project are costs of $750,000 per year, benefits of $950,000 per year, and disbenefits of $200,000 per year. Calculate the conventional B/C ratio at an interest rate of 10% per year, and determine if it is economically justified. The B/C ratio is The project is economically justified

From the following data, use the conventional B/C ratio for a project that has a 20-year life to determine if it is economically justified. Use an interest rate of 8% per year. Consequences To the People Annual benefits = $135,000 per year Annual disbenefits = $10,000 per year The B/C ratio is The project is [[(Click to select) To the Government First cost = $700,000 Annual cost Annual savings $141,000 per year $30,000 per year E =

An alternative has the following cash flows: benefits = $50,000 per year; disbenefits = $27,000 per year; costs = $25,000 per year. The B/C ratio is closest to: (a) 0.92 (b) 0.96 (c) 1.04 (d) 2.00

A shopping center is to be built in one of four different cities. The cash flow estimates associated with each alternative are given below. You will be using the conventional B/C ratio method to determine which city should be selected at an interest rate of 15% per year. One alternative must be selected. The following table shows the details of each alternative. Alternative Benefits, s/year Disbenefits, $/year ERR City1 95 12 8 170 City2 Life, years First cost, $ M&O costs, $/year Please find the following - B/C of City1 ✓ Incremental B/C of City1 vs. City3 30 110 55 12 210 30 City3 90 12 8 160 30 City4 105 15 10 180 25 Based on the incremental B/C analysis applied to all four cities, choose one city among the four cities. A. 1.22 B. City3 C. 0.00 D. City2 E. 2.50 F. 1.00 G.1.19 H.City4 1. City1 J. 2.24 K. 1.48

A consultant, after 3 months of work, reported that the modified B/C ratio for a city-owned hospital heliport project is 1.6. If the initial cost is $1.8 million and the annual benefits are $125,000, what is the amount of the annual M&O costs used in the calculation? The report stated that a discount rate of 7% per year and an estimated life of 35 years were used. The M&O cost is $ .

A rural, agriculture-based city that has 17,000 households is required to install treatment systems for the removal of arsenic and other harmful chemicals from its drinking water. The annual cost is projected to be $150 per household per year. Assume that one life will be saved every 3 years as a result of the removal systems. (a) What is the B/C ratio, if a human life is valued at $4.8 million? Use an interest rate of 8% per year and assume the life is saved at the end of each 3-year period. (b) What justifies the project?

The following estimates (in $1000 units) have been developed for a security system upgrade at Chicago’s O’Hare Airport. (a) Calculate the conventional B/C ratio at a discount rate of 10% per year. Is the project justified? (b) Determine the minimum first cost that is possible to render the project just economically unjustified. Item Cash Flow First cost, $ 13,000 AW of benefits, $ per year 3,800 FW of disbenefits, year 20, $ 6,750 M&O costs, $ per year 400 Life, years 20

The city of Valley View, California, is considering various proposals regarding the disposal of used tires. All proposals involve shredding, but the benefits differ in each plan. An incremental B/C analysis was initiated, but the engineer conducting the study left recently. Using a 20 year study period and an interest rate of 8% per year, a. Fill in the blanks in the incremental B/C columns of the table below b. Which alternative should be selected? Alternative P Q R S PW of Cost $ Million 10 40 50 80 B/C Ratio 1.1 2.4 1.4 1.8 AB/C Ratio (when compared with Alternative) P R Q 2.83 2.83 S

The State Highway Department is considering a bypass loop that is expected to save motorists $820,000 per year in gasoline and other automobilerelated expenses. However, local businesses will experience revenue losses estimated to be $135,000 each year. The cost of the loop will be $9,000,000. (a) Calculate the conventional B/C ratio using an interest rate of 6% per year and a 20-year project period. (b) Calculate the conventional B/C ratio without considering the disbenefits. Is the project economically justified with and without considering the revenue losses? (c) Develop the single-cell spreadsheet functions that will answer the two questions above.