To promote sports in Qatar, the National Olympic committee is planning to construct a new handball stadium, with the initial cost of $10 million and an upgrade cost of $478 thousand in year 3. The annual operating costs are expected to be $125 thousand. It is expected to bring an overall benefit to the public worth $1.2 million each year. However, it is also anticipated that disbenefits of $191 thousand each year is due to utilization of extra resources. If the project life is given to be 9 years for analysis purpose, determine the B/C ratio using the conventional benefit-to-cost ratio method. Use an interest rate of 12% per year.

To promote sports in Qatar, the National Olympic committee is planning to construct a new handball stadium, with the initial cost of $10 million and an upgrade cost of $478 thousand in year 3. The annual operating costs are expected to be $125 thousand. It is expected to bring an overall benefit to the public worth $1.2 million each year. However, it is also anticipated that disbenefits of $191 thousand each year is due to utilization of extra resources. If the project life is given to be 9 years for analysis purpose, determine the B/C ratio using the conventional benefit-to-cost ratio method. Use an interest rate of 12% per year.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 19P

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