ABS mall is considering building a new parking lot. The land will cost $25,000 and the construction cost of the lot is estimated to be $150,000. Each year costs associated with the lot are estimated to be $17,500. The income from the lot is estimated to be $18,000 the first year and increase by $3,500 each year for the twelve year expected life of the lot. Determine the B/C ratio if ABS mall uses a cost of money of 4%(Use conventional)

ABS mall is considering building a new parking lot. The land will cost $25,000 and the construction cost of the lot is estimated to be $150,000. Each year costs associated with the lot are estimated to be $17,500. The income from the lot is estimated to be $18,000 the first year and increase by $3,500 each year for the twelve year expected life of the lot. Determine the B/C ratio if ABS mall uses a cost of money of 4%(Use conventional)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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IC OM B D Life/years X Z Y X $320,000 $45,000 $110,000 $20,000 10 W Y $540,000 $35,000 $150,000 $45,000 20 Based on the above ME alternatives and using the B/C analysis, which alternative we should select?i=10%. Z $300,000 $50,000 $80,000 $10,000 10 W $330,000 $20,000 $95,000 $30,000 20 V $250,000 $40,000 $90,000 $10,000 15
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Given the data for two alternatives, choose the better alternative using the B/C ratio analysis. MARR = 8% (Hint: If using EUAW, change each first cost to annual fırst then do incremental. If using PW, match the cash flows (rebuy Bottom) before subtracting.) Alternative Bottom Тop First Cost $100,000 $140.000 Operating Costs/Yr 50,000 100,000 60,000 Benefits/Yr 120,000 Maintenance/Yr 30,000 25,000 Life in years 10
The two alternatives shown are under consideration for improving security at a facility. Determine which one should be selected, if any, based on a B/C analysis. Consider an interest rate of 7% per year and a 10-year study period. Additional information is provided in Table Q 6(b). Page 4 of 5 Table Q 6(b) Alternative 1: Extra Cameras | Alternative 2: New Sensors First cost, $ Annual O&M cost, $ 38000 87000 49000 64000 Annual benefits, $ Annual disbenefits, $ 110000 160000 26000
Demonstrate that for this highway construction project, the same B/C ratio is obtained using the present and annual worth formulations. Initial costs of construction $1,500,000 Annual costs for maintenance 65,000 Annual benefits to travelers 225,000 Residual value after useful life 300,000 Useful life of investment 30 years Interest rate 8%
Using the incremental B / C analysis (AB/C). Determine the best alternative. Using the incremental rate of return (AROR) analysis. Determine the best alternative. MARR = 10%. First cost O &M Cost/year Benefit/year Salvage value Life in years A 45,000 $4,000 $15,000 $9,000 B $25,000 $1,500 $9,500 $5,000 10 C $35,000 $3,000 $14,000 $7,000 $15,000 $2,000 $8,000 $3,000
The B/C ratio for the following cash flow estimates calculated at an interest rate of 10% is .89, which means that the project is currently not justified. What would the maximum first cost be for this project to be justified? Item PW of benefits, $ AW of disbenefits, $/year First cost, $ M&O costs, $/yr Life, years Estimate 3,800,000 45,000 1,200,000 310,000 20 775,723 140,952 863,993 1,092,000
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)
4. Incremental ROR and B/C methods require the LCM of the two alternatives being compared. Select one: True False
Four mutually exclusive projects are being considered for a new 2-mile jogging track. The life of the track is expected to ing agency's MARR is 9% per year. Annual benefits to the public have been estimated by e shown below. Use the B-C method (incrementally) to select the best jogging track. Problem 10-17 (algorithmic) Q Initial cost Annual benefits B-C ratio A $50,000 $8,000 1.78 Alternative A Alternative B $145,000 $21,000 1.61 $55,000 $9,000 1.82 D $64,000 $10,500 1.82 Perform the incremental B-C Analysis. Fill-in the table below. (Round to two decimal places.) Inc. B-C ratio Is the alternative acceptable? Yes 1.78 □
Consider a piece of equipment that has the following cost and benefit estimates, and the interest rate is 15% per year: Initial investment: $200,000 Equipment life: 10 years Salvage value: $10,000 Annual receipts: $100,000 Annual expenses: $50,000 What is the modified B/C ratio of this equipment? Click the icon to view the interest and annuity table for discrete compounding when = 15% per year. Thr modified cost-benefit ratio is (Round to two decimal places.) According to the B-C ratio method, the project is More Info Single Payment Compound Amount Present Factor Worth Factor To Find F To Find P Discrete Compounding; /= 15% Compound Amount Factor To Find F Uniform Series Sinking Present Capital Recovery Worth Factor To Find P Fund Factor To Find A Factor To Find A Given P Given F Given A Given A Given F Given P N FIP P/F F/A PIA A/F A/P 1 1.1500 0.8696 1.0000 0.8696 1.0000 1.1500 2 1.3225 0.7561 2.1500 1.6257 0.4651 0.6151 3 1.5209 0.6575 3.4725 2.2832 0.2880 0.4380 4 1.7490 0.5718…
Consider 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 B