The Asch Foundation expects to award $7,500,000 in grants to public high schools

Question

The Asch Foundation expects to award $7,500,000 in grants to public high schools to develop new ways to teach students the fundamentals of engineering that prepare students for unlversity level materials. The grants will extend over a 10 year period and will create and estimated savings of $1 500,000 in faculty salarles The Foundation uses a rate of retum of 6 per year on grant awards Operating expenses will be $200,000 per year Use the B/C method to determine if the grant program is economically justfied What is the B/C Ratio? Ans.xx

Explanation / Answer

Solution:

AW of investment cost

7,500,000 * (A/P, 6%, 10) = 1,019,010

AW of benefit

1,500,000

AW of disbenefit

nil

AW of M&O cost

200,000

B/C: 1,500,000 / (1,019,010 + 200,000) = 1.23

As B/C is greater than 1, thus the project should be accepted

AW of investment cost

7,500,000 * (A/P, 6%, 10) = 1,019,010

AW of benefit

1,500,000

AW of disbenefit

nil

AW of M&O cost

200,000

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