Determine which alternative is the most viable by incremental B / C (values in thousands), considering an interest rate of 3% A B C D E F Initial cost 500 550 300 550 500 600 Total annual costs $ 360 480 180 600 300 660 Annual income $ 550 620 325 900 550 800 Against annual profits 300 300 400 300 300 200 ---Methods of economic evaluation of alternatives----

Determine which alternative is the most viable by incremental B / C (values in thousands), considering an interest rate of 3% A B C D E F Initial cost 500 550 300 550 500 600 Total annual costs $ 360 480 180 600 300 660 Annual income $ 550 620 325 900 550 800 Against annual profits 300 300 400 300 300 200 ---Methods of economic evaluation of alternatives----

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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A county in Tennessee is considering the following public interest project. Initial Cost $22.5M Annual Maintenance Cost $525K EUAB $3.3M Given a useful life of 12 years and an interest rate of 4%, the benefit /cost ratio is _____________________. Group of answer choices 1.01 1.13 1.51 1.67 1.48
A municipal power plant uses natural gas from an existing pipeline at an annual cost of $40,000 per year. A new pipeline would initially cost $100,000, but it would reduce the annual cost to $10,000 per year. (a) Assume an analysis period of 25 years and no salvage value for either pipeline. The interest rate is 6%. Using the equivalent uniform annual cost (EUAC), should the new pipeline be built? (b) The power plant uses natural gas. What are some of the noneconomic benefits to the municipality of this energy source over others? Develop three primary advantages and disadvantages.
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A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to be $1,000,000. It is estimated that this new equipment will save $100,000 the first year and increase gradually by $50,000 every year for the next 6 years. MARR=10% a. Using Benefit- Cost analysis, what is the Benefit/Cost ratio for this equipment purchase? b. Based on the Benefit/Cost analysis should Metro Atlanta purchase the equipment?
Tempe Inc. is considering four mutually exclusive public projects. The capital investment requirements, annual operating & maintenance (O&M) costs, and salvage values of these projects are given below. Each project has a useful life of 40 years, and the minimum attractive rate of return for Tempe is 11% per year. Which of the four projects, if any, should be selected? A B C D Capital Investment $21,500,000 $16,800,000 $30,400,000 $25,700,000 Annual Benefit 4,800,000 4,250,000 5,900,000 4,900,000 Annual O&M Cost 1,790,000 1,130,000 2,040,000 1,800,000 Market Value 2,260,000 2,080,000 3,800,000 2,900,000
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4. A government is planning to implement a new traffic control and surveillance system. The maintenance cost of the system is $1,200,000 per year. It is believed that the new system can help 3,000 driver saving 8 hours per year. The average wage of the people in this country is $150 per hour. It is expected that the system can be used for 5 years, i.e., the first benefit and cost are B1 and C1 respectively, while the last are B5 and C5. (a) What is the value of time saved by the new system per year? (b) Suppose the market interest rate is 5%. Calculate the net present value of this system. Should the system be launched? (c) Suggest two reasons to explain why the market interest rate in part (b) may be too high to evaluate the project. Should the system be launched if the interest rate is adjusted according to your suggestions?
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7. A new waste truck is needed for a portion of the city. Compare the asset with the Benefit Cost method? The interest rate is 8% Present value = $55,000Annual cost $11, 500Annual savings $28, 500Salvage value $6,800Life in years 100. B/C 0.72b./ 1.40c. B/C 1.47d. B/C 1.88
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