B should be Greater than 1 because the alternative is acceptable A state-sponsor
ID: 2517537 • Letter: B
Question
B should be Greater than 1 because the alternative is acceptable
A state-sponsored Forest Management Bureau is evaluating alternative routes for a new road into a formerly inaccessible region. Three mutually exclusive plans for routing the road provide different benefits, as indicated in table below. The roads are assumed to have an economic life of 45 years, and MARR is 9% per year. Which route should be selected according to the B-C ratio method? Assume that a roadway must be constructed Construction Costs $290,000 210,000 190,000 Annual Recreational Benefit $6,000 7,000 3,000 Annual Maintenance Annual Savings in Annual Timber Access Benefit $2,900 1,700 Route Cost $4,000 3,300 1,900 Fire Damage $13,000 7,000 4,500 700 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 9% per year Perform the incremental B-C Analysis. Fill-in the table below. (Round to four decimal places.) Alternative Inc. B-C ratio Is the alternative acceptable? 0.4235 YesExplanation / Answer
Please note the following point:
It has been mentioned in the question that a roadway must be constructed. This implies that from all the available alternative, the alternative which has maximum Inc B-C ratio is to be selected even if its B-C ratio is less than 1.
Answer:
In the requirement part of question only B-C analysis is to be done for Alternative B & C. Thus 'Yes' mentioned in question for acceptance of Alternative B implies that B-C ratio of B is higher than C.
Alternative Annual Benefits PVIFA PV of benefits Annual Cost PV of Annual Cost Contruction Cost Total PV of Cost Inc. B-C Ratio A 21,900 10.8812 2,38,298 4,000 43,525 2,90,000 3,33,525 0.7145 B 15,700 10.8812 1,70,835 3,300 35,908 2,10,000 2,45,908 0.6947 C 8,200 10.8812 89,226 1,900 20,674 1,90,000 2,10,674 0.4235Related Questions
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