es the larges consistent\"si value? Why? there are thre 9-42 A school is overcro
ID: 1143029 • Letter: E
Question
es the larges consistent"si value? Why? there are thre 9-42 A school is overcrowded and options. The do-nothing alternative co continuing to use modular classrooms. Th can be expanded, or a new school can e split the load" between the schools. User built to benefts come from improvements in school perfomance the expanded or new schools. If a new school built, there are more benefits because more will be able to walk to school, the average for those who ride the school buses will be shonte and the schools will be smaller and more "studem friendly." The disbenefits for the expanded school are due to the impact of the construction procs during the school year. The interest rate is 8%, and the life of each alternative is 20 years. Which alter native should be chosen? What is the incremental ratio for the preferred alternative? Alternative Expand New School 2.1 0.8 8.8 0.95 3.1 al rS ng User benefits (SM/yr) User disbenefits (SM) First cost (SM) Operations and mainte- nance (SM/yr) 10.4 1.7 te ell (a) Use the benefit-cost ratio. (b) Use the modified benefit-cost ratio. (c) Use the public/government version of the BC na- on- ion fits uc- ratio. (d) Assume these numbers apply to a private fm and use a present worth index.Explanation / Answer
a) While calculating the benefit cost ratio, the total benefit is to be calculated by reducing disbenefits from the benefit amount. Similarly the cost can be summarised by converting all costs into present value of all future costs.
The cost benefit analysis in details is as under:
Opening a new school is a better option due to better benefit cost ratio.
For public version, the calculation would be based on total cost and benefits rather than present value calculation:
Hence expanding would be a better option in this case having better benefit cost ratio
interest rate 8% life of each alternative 20Related Questions
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