3,000 ,600 Cost, S/year Benefits, S/year 20,000 29,000 30,000 35,000 30,000 35,0

Question

3,000 ,600 Cost, S/year Benefits, S/year 20,000 29,000 30,000 35,000 30,000 35,000 Disbenefits, $/year 500 1,500 1,000 0 5,000 1,000 Multiple Alternatives 9.40 A group of engineers responsible for developing advanced missile detection and tracking technolo- gies, such as shortwave infrared, thermal infrared detection, target tracking radar, etc., recently came up with six proposals for consideration. The pres- ent worth (in $ billions) of the capital requirements and benefits is shown for each alternative in the table. Determine which one(s) should be under- taken, if they are (a) independent and (b) mutually exclusive.

Explanation / Answer

For mutually exclusive projects, only the project with highest B/C ratio is selected

Hence we select D with highest B/C ratio of 1.209

For independent projects with no restriction on budget, all projects with B/C ratios greater than 1 are acceptable

Hence we select B, C, D and E

Proposals A B C D E F PW of costs 80 50 72 43 89 81 PW of benefits 70 55 76 52 85 84 B/C 0.875 1.100 1.056 1.209 0.955 1.037

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