9.3The following table indicates the conventional benefit-cost ratios for 6 proj

Question

9.3The following table indicates the conventional benefit-cost ratios for 6 projects which are ranked, in terms of their respective initial cost, from smallest (A) to largest (F) B/C Ratios Projects 1.2 1.15 0.8 0.9 1.05 a) Determine which public sector projects are acceptable? All projects with an individual benefit-cost ratio at least equal to unity are acceptable: B, C, D, E and F Tvpical Problems and Solutions Engineering Econ Prepared by: C. Théoret October 2011 COST-BENEFIT ANALYSIS Page 22 b) Determine the best public sector project. Comparing projects B, C, D, E and F: * * * * project B is preferred to project A project C is preferred to project B project C is preferred to project D project E is preferred to project C project E is preferred to project F * Therefore project E is the best public sector project.

Explanation / Answer

B/C (A,B) = 1.9 > 1

Project B is preferred to project A

B/C (C,B) = 1.7 > 1

Project C is preferred to project B

B/C (C,D) = 0.9 < 1

Project C is preferred to project D

B/C (E,C) = 1.1 > 1

Project E is preferred to project C

B/C (E,F) = 0.9 < 1

Project E is preferred to project F

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