Problem 09.029 - Two alternative comparisonOne of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated witheach alternative are available. Use B/C analysis at a discount rate of 8.00% per year over a 20-year study period to determine whichalternative should be selected. For analysis purposes only, assume that the benefits of reduced flood damage are available in years3.00, 11.00, and 18 of the study period.Initial Cost, $Annual Maintenance, $/YearReduced Flood Damage, $(Round the final answer to four decimal places.)The AB/C ratio is1.11The alternative that should be selected is the channelRetention Pond980,00092,000200,000Channel2,100,00030,000725,000

The objective of the question is to determine which of the two alternatives, Retention Pond or…

Answered: Problem 09.029 - Two alternative…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 PAM partner company won a tender to provide clean water distribution facilities in an area that is being developed as a tourist area. There are 2 alternatives that can be taken in implementing the project. The first alternative requires construction and installation costs of IDR 10 million per kilometer with maintenance costs of IDR 0.35 million per kilometer per year. The remaining value is estimated at IDR 1 million per kilometer at the end of the 20th year. The second alternative requires construction and installation costs of IDR 7 million per kilometer with maintenance costs of IDR 0.40 million per kilometer per year. The remaining value is estimated at IDR 1.2 million per kilometer at the end of the 20th year. If the company chooses the first alternative, the length of the pipe that must be installed is 10 kilometers, and if the second alternative the length of the cable is 16 kilometers. Determine which alternative is more efficient using MARR = 11%!
As part of the rehabilitation of the downtown area of a southern U.S. city, the Parks and Recreation Department expects to develop the space below several overpasses into basketball, handball, miniature golf, and tennis courts. The estimates are: initial cost of $190,000, life of 20 years, and annual M&O costs of $21,000. The department expects 20,000 people per year to use the facilities an average of 2 hours each. The value of the recreation has been conservatively set at $1.00 per hour. At a discount rate of 6% per year, what is the B/C ratio for the project?
For mutually exclusive projects are being considered for a 2 mile jog in track. The life of the track is expected to be 75 years and the sponsoring agency MARR is 13% per year annual benefits to the public. I've been estimated by an advisory committee and are shown below used to be – C method incrementally to select the best jogging track.
A public utility in a medium-size city is considering two cash rebate programs to achieve water conservation. Program 1, which is expected to cost an average of $60 per household, provides a rebate of 75% of the purchase and installation costs of an ultra-low-flush toilet ($100 max). This program is projected to achieve a 5% reduction in overall household water use over a 5-year evaluation period. This will benefit the citizenry to the extent of $1.25 per household per month. Program 2 involves turf replacement with xeric (low water need) landscaping. The program is expected to cost $500 per household, but it will result in reduced water cost estimated at $8 per household per month (on the average). Use the B/C method at a discount rate of 0.5% per month to determine which program, if any, the utility should undertake. The programs may be (a) mutually exclusive, or (b) independent
Calculate the B/C ratio for the following cash flow estimates at a discount rate of 10% per year. Is the project justified? Item Estimate PW of benefits, $ 3,800,000 AW of disbenefits, $/year 45,000 First cost, $ 1,200,000 M&O costs, $/year 300,000 Life, years 20
The construction cost of the bypass is $20 million, and $500,000 would be required each year for annual maintenance. The annual benefits to the public have been estimated to be $2.7 million. If the study period is 50 years and the state’s interest rate is 8% per year, should the bypass be constructed?
The estimated first cost of a permanent national monument is $2 million with annual benefits and disbenefits estimated at $360,000 and $42,000, respectively. The B/C ratio at 6% per year is closest to: (a) 0.16 (b) 0.88 (c) 1.73 (d) 2.65
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.
A proposed change to highway design standards is expected to reduce the number of vehicle crashes by 9,200 per year, but will have an initial cost of $150,000,000 and annual costs of $25,000,000. Given an interest rate of 10% and a study period of 8 years, the average cost of each vehicle crash in order that the benefit-to-cost ratio is 1.0 is _________________. Group of answer choices $9103 $6767 $5773 $8733
The Adams Construction Company is bidding on a project to install a large flood drainage culvert from Dandridge to a distant lake. If they bid $2,000,000 for the job, what is the benefit-cost ratio in view of the following data? The MARR is 6% per year, and the project’s life is 30 years.
Recent development near Eugene, Oregon, has identified a need for improved access to Interstate 5 at one location. Civil engineers and public planners are considering three alternative access plans. Benefits are estimated for the public in general; disbenefits primarily affect some local proprietors who will see traffic pattern changes as undesirable. Costs are monetary for construction and upkeep, and savings are a reduction in cost of those operations today that will not be necessary in the future. All figures are relative to the present situation, retention of which is still an alternative, and are annualized over the 20-year planning horizon. Solve, a. What is the B/C ratio for each of these alternatives? b. Using incremental B/C ratio analysis, which alternative should be selected? c. Determine the value of B − C for each alternative.

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