you are working for a construction firm that has decided to bid on a project to
ID: 2657840 • Letter: Y
Question
you are working for a construction firm that has decided to bid on a project to build street lamp posts. you want to make a cost benefit ratio of the upcoming project. you notice this information about the project .. initial cost= $1,600,000 annual maintaince= $60,000 annual operation cost= $160,000. the annual benefit to the tax payers was calclated ahead of time and projected to be roughly $345,000 a year. the MARR is 12% and the project life cycle is 50 years. should you take this project and why?
Explanation / Answer
Net benefit each year = 345,000 - 60,000 - 160,000 = 125,000
PMT = 160,000 , FV = 0, N = 50, rate = 12%
use PV function in Excel
PV of the benefits = 1,328,720
since the benefit is less than the cost one should not take the project
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