2 One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated witheach alternative ate availatile Use BC analysis at a discuunt rate of 5% per year over a 20-year stutly period to deterrmine whichalternative should be selected. For analysis purposes only, assume that the benefits of reduced flood damage are available in years 7.12. and 18 of the study pertod.Retention PondChannelInitial Cost, S980,0002,900.000Annual Maintenance. SYear92.00030,000Reduced Flood Damage, S200,000575.000The AR/C ratio isThe altemative that should be selected is the (Cick lo select)

solution benefit cost ratio = present value of the benefit / present value of cost calculation of…

Onie of two alternatives wl be selected to reduce food demage in a rural community in central Arizona. The estimates associated with each allernative are avalable Use RC analysis at a discunt rate of 5% per year over a 20-year sutly period to delermine which alternative should be selected. For analyss purposes only, assume that the benefits of reduced flood damage are available in years 7. 12. and 18 of the study pertod. Retention Pond Channel Intal Cost, S 980 000 2,900.000 Annual Maintenance. SYear 92.000 30,000 Recuced Flood Damage, S 200000 575000 The ARC ratos The altemative that should be seliected s Cick to

Onie of two alternatives wl be selected to reduce food demage in a rural community in central Arizona. The estimates associated with each allernative are avalable Use RC analysis at a discunt rate of 5% per year over a 20-year sutly period to delermine which alternative should be selected. For analyss purposes only, assume that the benefits of reduced flood damage are available in years 7. 12. and 18 of the study pertod. Retention Pond Channel Intal Cost, S 980 000 2,900.000 Annual Maintenance. SYear 92.000 30,000 Recuced Flood Damage, S 200000 575000 The ARC ratos The altemative that should be seliected s Cick to

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Highridge Water District needs an additional supply of water from Steep Creek. The engineer has selected two plans for comparison: Gravity plan: Divert water at a point 10 miles up Steep Creek and carry it through a pipeline by gravity. Pumping plan: Divert water at a point near the district and pump it through 2 miles of pipeline. The pumping plant can be built in two stages: half now and half 10 years later Annual benefits are $190,00 for both plans. Use a 35-year analysis period and 6% interest. Salvage values can be ignored. Use the conventional benefit–cost ratio method to select the more economical plan.
A southwestern city that has 170,000 households is required to install treatment systems for the removal of arsenic from drinking water. The annual cost is projected to be $50 per household per year. Assume that one life will be saved every three years as a result of the arsenic removal system andthat the EPA values a human life at $4.8 million. Use a discount rate of 8% per year and assume the life is saved at the end of each three-year period.Utilize a conventional B/C ratio to determine if the project is economically justified.
A municipal police department has decided to acquire an unmanned dronefor aerial surveillance of a high-crime region of their city. Three mutually exclusive drones are being studied and their data are provided below. All alternatives are expected to have negligible market (salvage) values at the end of five years. The police department’s MARR is 8% per year. Which droneshould be selected?
The Army Corps of Engineers wants to construct a dam on a flood-prone river. The estimated construction cost and average annual dollar benefits are listed below. A 6% per year rate applies and dam life is infinite for analysis purposes. (a) Select the one best location using the B/C method. (b) If the sites are now considered independent projects, which sites are acceptable?
A quarry outside of Austin, Texas, wishes to evaluate two similar pieces of equipment by which the company can meet new state environmental requirements for dust emissions. The MARR is 12% per year. Determine which alternative is economically better using (a) the AW method, and (b) AW method with a 3-year study period.
A flood control project with a life of 16 years will require an investment of $60,000 and annual maintenance costs of $5,000. The project will provide no benefits for the first two years but will save $24,000 per year in flood damage starting in the third year. The appropriate MARR is 12% per year. Use this information to answer What is the modified B–C ratio for the flood control project? (a) 1.53 (b) 1.33 (c) 1.76 (d) 2.20 (e) 4.80. Select the closest answer.
Solar and conventional power alternatives are available to provide energy for monitoring equipment at a remote irrigation canal site. The estimates associated with each alternative have been developed. Use the B/C method to select one at an interest rate of 7% per year over a 5-year study period. One of the alternatives must be selected. Alternative Conventional Solar Initial cost, $ 200,000 1,300,000 Annual power cost, $/year 80,000 9,000 Salvage value, $ — 150,000
An area on the Colorado River is subject to periodic flood damage that occurs, on the average, every two years and results in a $2,000,000 loss. It has been proposed that the river channel be straightened and deepened, at a cost of $2,500,000, to reduce the probable damage to not over $1,600,000 for each occurrence during a period of 20 years before it would have to be deepened again. This procedure would also involve annual expenditures of $80,000 for minimal maintenance. One legislator in the area has proposed that a better solution would be to construct a flood-control dam at a cost of $8,500,000, which would last indefinitely, with annual maintenance costs of not over $50,000. He estimates that this project would reduce the probable annual flood damage to not over $450,000. In addition, this solution would provide a substantial amount of irrigation water that would produce annual revenue of $175,000 and recreational facilities, which he estimates would be worth at least $45,000 per…
The city of Peachtree is comparing the following two plans for supplying water to a newly developed subdivision:1 Plan A will manage requirements for the next 15 years; at the end of thatperiod, the initial cost of $1,500,000 will have to be doubled to meet the requirements of subsequent years. The facilities installed in years 0 and15 may be considered permanent; however, certain supporting equipmentwill have to be replaced every 30 years from the installation dates at a costof $200,000. Operating costs are $91,000 a year for the first 15 years and$182,000 thereafter. Beginning in the 21st year, they will increase by $3,000a year.2 Plan B will supply all requirements for water indefinitely into the future,although it will operate at only half capacity for the first 15 years. Annualcosts over this period will be $105,000 and will increase to $155,000 beginning in the 16th year. The initial cost of Plan Bis $1,950,000; the facilities can be considered permanent, although it will be…
An environmental engineer must recommend one of two methods for monitoring high colony counts of E. coli and other bacteria in watershed area “hot spots.” Estimates are tabulated and the MARR is 10% per year. Use tabulated factors or a spreadsheet for your analysis.a. Use present worth analysis to select the better method.b. For a study period of 3 years, use PW analysis to select the better method.
A state-sponsored Forest Management Bureau is evaluating alternative routes for a new road into a formerly inaccessible region. Three mutually exclusiveplans for routing the road provide different benefits, as indicated in Table shown. The roads are assumed to have an economic life of 50 years, and MARR is 8% per year. Which route should be selected according to the B–C ratio method?
A city government is considering two types oftown-dump sanitary systems. Design A requires aninitial outlay of $400,000 with annual operating andmaintenance costs of $50,000 for the next 15 years;design B calls for an investment of $300,000 withannual operating and maintenance costs of $80,000per year for the next 15 years. Fee collections fromthe residents would again be $85,000 per year. Theinterest rate is 8%, and no salvage value is associatedwith either system.(a) Using the benefit–cost ratio BC(i), which systemshould be selected?M16_PARK9091_06_GE_C16.indd 901 10/22/15 5:22 PM902 Chapter 16 Economic Analysis in the Service SectIf a new design (design C), which requires aninitial outlay of $350,000 and annual operatingand maintenance costs of $65,000, is proposed,would your answer in part (a) change?