Pearson eText for Engineering Economy -- Instant Access (Pearson+)
17th Edition
ISBN: 9780137533138
Author: William Sullivan, Elin Wicks
Publisher: PEARSON+
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Chapter 10, Problem 26FE
To determine
Calculated the cost benefit ratio
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What is the B/C Ratio for a firm considering an investment in a new manufacturing technology? Investment = $2,500,000 Salvage Value = $150,000 MARR = 15%
Net Annual Savings = $600,000 Project Life = 10 years
Please don't just use excel, please show steps..
Use AW method to calculate the benefit/cost ratio at i = 6% for a new library. The first cost is $500K, and O&M costs are $100K per year. There is no salvage value after 30 years. Community benefits are estimated to be $130K per year. Is the library economically justified? Write a brief interpretation of your answer.
Determine the number of souvenir coins that must be sold per year to justify the purchase of a $6000 stamping machine. Each coin will be sold for $5.00 with a variable cost of $1.50. The machine will have little or no salvage value at the end of its 4-year useful life. Use an interest rate of 8%. What happens to the BEP if the variable cost increases to $2 per unit?
M
ences
Calculate the B/C ratio for the following cash flow estimates at a discount rate of 10% per year. Is the project justified?
Estimate
3,550,000
45,000
1,025,000
220,000
20
Item
PW of Benefits, S
AW of Disbenefits, $/year
First Cost, $
M&O Costs, $/Year
Life, Years
The B/C ratio is
The project is (Click to select)
Chapter 10 Solutions
Pearson eText for Engineering Economy -- Instant Access (Pearson+)
Ch. 10 - Prob. 1PCh. 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 - Prob. 29FECh. 10 - Prob. 30FECh. 10 - Prob. 31FE
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- A tire company will purchase a new tire balancing equipment. The machine will cost $12,699 with an annual savings of $1,500, a salvage value of $250 at the end of 12 years and the MARR of 6%. Use B/C analysis to determine whether or not the equipment should be purchased. B/C=?arrow_forwardCalculate the modified and conventional B-C Ratio using AW in four decimal places. Is the project acceptable?arrow_forwardA local government is considering promoting to urism in the city. It will cost$8,000 to develop a plan. The anticipated annual benefits and costs are as follows:Annual benefits: Increased local income and tax collections $ 125,000Annual support service: Parking lot expansion, rest room. $50,000patrol car, and street repairIf the city government uses a discount rate of 8% and a study period of fiveyears. is this tourism project justifiable according to the benefit-cost analysis?arrow_forward
- A state is planning to construct a stretch of highway extending to 60 Kilometer. The state signed a contract based on the BOT option (Build, Operate, and Transfer) with a construction company. The construction company will finish the project in two years (30 kilometers per year), after which it will operate the highway for 25 years. The company generates revenues by collecting a flat fees from the cars using the highway. The following information is available: Cost/Kilometer: 1,000,000 S Number of cars using the highway: 500,000 car for the first year of usage, then increase by 5% a year. - Annual operation cost: 100,000 $ for the first year of usage, then increase by 10,000 $ every year. The company's MARR is 8% per year. Calculate the value of the fee charged/car so that the Net Present worth of the project is 25,000,000 S.arrow_forwardThe following data are for two mutually exclusive projects: PW(benefits) PW(operating and maintenance costs) PW(capital costs) Project A $20,000,000 $5,000,000 $5,000,000 Project B $15,500,000 $8,000,000 $1,000,000 (a) What is the benefit-cost ratio for Project A (to two decimal points): Number (b) What is the benefit-cost ratio for Project B (to two decimal points): Number (c) What is the modified benefit-cost ratio for Project A (to two decimal points)? Number (d) What is the modified benefit-cost ratio for Project B (to two decimal points)? Number (e) What is the benefit-cost ratio for the increment between projects (to two decimal points)? Number (f) What is the Present Worth of Project A? Number (g) What is the Present Worth of Project B? Number (h) Which is the preferred project (enter either 'A' or 'B')?arrow_forwardConsider the following cost proposals for the design and construction of a public art display. A B FC 1,200,000 1,800,000 AOC 75,000 100,000 Overhaul Cost in Year 10 900,000 125,000 If the discount rate of 7% is used and the useful life is 10 years before refurbishment, what is B/C ratio of the "delta" project and which option should be chosen? Consider the reduced overhaul cost of B in Year 10 as a "benefit" to the public. Group of answer choices A.0.761 and A B.0.508 and A C. 1.21 and B D. 1.09 and Barrow_forward
- 5,6,7 search Saved Help S GEarrow_forwardA company obtains an annual revenue of R300 000. The annual cost of goods sold is R120 000. The expenses are made up as follows: Salaries= R50 000 Telephone and internet services = R8 000 Water and lights = R10 000 Stationery = R5 000 Bank charges = R500 Compile a budget for this company showing the Gross profit and Net profit both in Rands and as a percentage value.arrow_forwardComparison of five mutually exclusive alternatives is shown. One must be accepted. According to the B/C ratio, which alternative should be selected (costs increase from A to E). AB/C Comparison Ratio A versus B 0.75 B versus C 1.4 C versus D 1.3 A versus C 1.1 A versus D 0.2 B versus D 1.9 C versus E 1.2 D versus E 0.9 O a. B O b. D Ос. А O d. E O e. Carrow_forward
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