3. a) From the following estimates, determine the B/C ratio for a project that has a 20- year life. Use an interest rate of 1% per year. Consequences to the government Consequences to the people Annual benefit $95000 First cost $650000 Annual disbenefits $10000 | Annual cost $20000 Annual savings $56000 [Hint: the value of I = |15.50 - last digit two of your unique id|; Example: if your id is 201-021-651 then I = |15.50-21| = 5.50%, so, interest rate will be 5.50%]

3. a) From the following estimates, determine the B/C ratio for a project that has a 20- year life. Use an interest rate of 1% per year. Consequences to the government Consequences to the people Annual benefit $95000 First cost $650000 Annual disbenefits $10000 | Annual cost $20000 Annual savings $56000 [Hint: the value of I = |15.50 - last digit two of your unique id|; Example: if your id is 201-021-651 then I = |15.50-21| = 5.50%, so, interest rate will be 5.50%]

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

100%

3. a) From the following estimates, determine the B/C ratio for a project that has a 20-
year life. Use an interest rate of 1% per year.
Consequences to the
government
Consequences to the people
Annual benefit
$95000
First cost
$650000
Annual disbenefits $10000
Annual cost
$20000
Annual savings
$56000
[Hint: the value of I = |15.50 - last digit two of your unique id/; Example: if your id
is 201-021-651 then I = |15.50-21| = 5.50%, so, interest rate will be 5.50%]

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