The public utility in a medium-sized city is considering two cash rebate programs to improve water conservation. Program 1, expected to cost an average of $60 per household, offers a rebate of 75% of the purchase and installation costs of an ultra low-flush toilet ($100 maximum). This programis 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 is the replacement of turf grasswith xeriscape landscaping. This is expected to cost $500 per household, but it will result in an average reduced water cost estimated at $8 perhousehold per month. At a discount rate of 0.5% per month, use the B/C method to determine which program(s) the utility should undertakeif the programs are (a) mutually exclusive, and (b) independent.
The public utility in a medium-sized city is considering two cash rebate programs to improve water conservation. Program 1, expected to cost an average of $60 per household, offers a rebate of 75% of the purchase and installation costs of an ultra low-flush toilet ($100 maximum). 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 is the replacement of turf grass
with xeriscape landscaping. This is expected to cost $500 per household, but it will result in an average reduced water cost estimated at $8 per
household per month. At a discount rate of 0.5% per month, use the B/C method to determine which program(s) the utility should undertake
if the programs are (a) mutually exclusive, and (b) independent.
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