For the following alternatives compute the Delta B/C ratio of Alternative D minus Alternative A. Use 11% as MARR. (Remember for our convention, salvage value is a minus cost.) Project Initial Investment Annual Benefit Salvage Value Useful Life A B D -1500 -2000 -2500 -5200 350 500 600 850 320 610 820 2300 5 6 7 1.73 1.18

For the following alternatives compute the Delta B/C ratio of Alternative D minus Alternative A. Use 11% as MARR. (Remember for our convention, salvage value is a minus cost.) Project Initial Investment Annual Benefit Salvage Value Useful Life A B D -1500 -2000 -2500 -5200 350 500 600 850 320 610 820 2300 5 6 7 1.73 1.18

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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Which statement is not true with respect to estimating the economic impacts of proposed engineering projects? (a) Order-of-magnitude estimates are used for high-level planning. (b) Order-of-magnitude estimates are the most accurate type at about –3 to 5%. (c) Increasing the accuracy of estimates requires added time and resources. (d) Estimators tend to underestimate the magnitude of costs and to overestimate benefits.
build a modelAn industrial park is being planned for a tract of land near a river. To prevent flood damage to the industrial buildings that will be built on this low-lying land, an earthen embankment can be constructed. The height of the embankment will be determined by an economic analysis of the costs and benefits.The following data have been gathered (Tables 1 and 2). The embankment is expected to last 40 years and will require no maintenance.Whenever the flood water flows over the embarkment, a $310,000 in annual damages occur. The corporation uses an interest rate of 15% a) if they build the embarkment, what height should it have? Table 1 Table 2 Embankment Height Above Roadway (m) Initial Cost ($) Embankment Height Above Roadway (m) Avg Frequency That Flood Level Will Exceed heigh of embarkment 2.0 $ 100,000.00 2.0 Once in 3 years 2.5 $ 165,000.00 2.5 Once in 8 years 3.0 $ 300,000.00 3.0 Once in 25 years 3.5…
If the capital budget limit is $120,000, the MARR is 10% per year, and all projects have a 10-year life, rank and select from the independent projects using the (a) PI measure, (b) IROR measure, and (c) PW at the MARR. (d) Are different projects selected using the three methods? First Net Income, IROR, PW at Project Cost, $ $ per Year % 10%, $ A −18,000 4,000 18.0 6,578 B −15,000 2,800 13.3 2,205 C −35,000 12,600 34.1 42,422 D −60,000 13,000 17.3 19,879 E −50,000 8,000 9.6 −843
The California Forest Service is considering two locations for a new state park. Location Ewould require an investment of $3 million and $50,000 per year in maintenance. Location Wwould cost $7 million to construct, but the Forest Service would receive an additional $25,000per year in park use fees. The operating cost of location W will be $65,000 per year. The revenueto park concessionaires will be $500,000 per year at location E and $700,000 per year at locationW. The disbenefits associated with each location are $30,000 per year for location E and $40,000per year for location W. Use(a) The B/C method, and(b) The modified B/C method to determine which location, if either, should be selected, using aninterest rate of 12% per year. Assume that the park will be maintained indefinitely.
Engineering economy - ENGR 3322 A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $18,000 per year over the six-year study period. At MARR of 19%, calculate the benefit-cost ratio of the project a. 53 b. 63 c. 73 d. None of the choices
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A municipality is investigating the maintenance and refurbishment of the main road through the town . They can either resurface the road every 10 years , or resurface every 15 years but with higher maintenance costs . The municipality uses a 5 % interest rate for their appraisals to include in their applications for the Municipal Infrastructure Grant ( MIG ) . The funding will be available such that construction can be completed by the end of the current financial year . They have determined the following data , but they need you to carry out an economic appraisal as the basis from which to advise them : 10 - year resurfacing cycle Resurfacing : R15 000 000 Maintenance schedule : Year 1-5 : zero Year 6 : R300 000 Year 7 : R600 000 Year 8-10 : R800 000 15 Year resurfacing cycle : Resurfacing : R15 000 000 Maintenance schedule : Year 1-5 : zero Year 6 : R300 000 Year 7 : R600 000 Year 8-10 : R800 000 Year 11-15 : R1 000 000
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 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. Whatwould the life of this project need to be in order to be cost-beneficial to the city? The interest rate on municipal bonds is 6% per year.
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