Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Chapter 10, Problem 19P
To determine
Selection of the project.
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Problem 09.029 Two Alternative Comparison
One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with
each alternative are available. Use B/C analysis at a discount rate of 8% per year over a 20-year study period to determine which
alternative should be selected. For analysis purposes only, assume that the benefits of reduced flood damage are available in years 7,
13, and 18 of the study period.
Retention Pond
Channel
Initial Cost, $
920,000
2,400,000
Annual Maintenance, $/Year
92,000
30,000
Reduced Flood Damage, $
200,000
775,000
The AB/C ratio is
The alternative that should be selected is the [retention pond
Four mutually exclusive projects are being considered for a new two-mile jogging track. The life of the track is expected to be 80
years, and the sponsoring agency's MARR is 12% per year. Annual benefits to the public have been estimated by an advisory
committee and are shown below. Use the IRR method to select the best jogging track.
Alternative
A
B
D
Initial Cost
$62,000
$52,000
$150,000
$55,000
Annual benefits
$10,000
$8,000
$20,000
$9,000
IRR
16.1%
15.4%
Four mutually exclusive projects are being considered for a new 2-mile jogging track. The life of the track is expected to be 85 years, and the sponsoring agency's MARR is 9% per year. Annual benefits to the
public have been estimated by an advisory committee and are shown below. Use the B-C method (incrementally) to select the best jogging track.
Initial cost
Annual benefits
B-C ratio
The best jogging track is alternative
A
$52,000
$7,500
1.60
Perform the incremental B-C Analysis. Fill-in the table below. (Round to two decimal places.)
Alternative
A
с
B
D
B
$62,000
$10,500
1.88
C…
Alternative
Inc. B-C ratio
1.60
C
$57,000
$9,000
1.75
D
$150,000
$19,000
1.41
Is the alternative acceptable?
Yes
Yes
Yes
Yes
Chapter 10 Solutions
Engineering Economy
Ch. 10 - The Adams Construction Company is bidding on a...Ch. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - A retrofitted space-heating system is being...Ch. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
Ch. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Four mutually exclusive projects are being...Ch. 10 - Two municipal cell tower designs are being...Ch. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - You have been requested to recommend one of the...Ch. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26FECh. 10 - Prob. 27FECh. 10 - Prob. 28FECh. 10 - A flood control project with a life of 16 years...Ch. 10 - Prob. 30FECh. 10 - Prob. 31FE
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