4. Using benefit-cost ratio analysis, a 10-year useful life, and a25% MARR, determine which of the following mutuallyexclusive alternatives should be selected.CostA B C D E$100 $210 $300 $400 $500Annual Benefit $37 $60 $83 $137 $150

To determine which alternative to select using benefit-cost ratio analysis, we need to calculate the…

Answered: 4. Using benefit-cost ratio analysis, a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Calculate the benefit-cost ratio with a 10-year useful life, and a 25% MARR, and determine which of the following mutually exclusive alternatives should be selected. A B C D E Cost $100 $200 $300 $400 $500 Annual benefit 37 60 83 137 150 O a. Recommendation: Option A. With B/C₂ = 1.32, B/C₁1.07, B/C=0.99, B/C = 1.22, B/C = 1.07 Ob. Recommendation: Option D. With B/CA 1.32. B/CB 1:07, B/Cc = 0.99, B/CD 1.22, B/C 1.07 OC Recommendation: Option E. With B/C = 1.32, 8/C= 107, 8/Ce - 0.99. B/Cp 122, B/C 1.07 = Od Recommendation: Option B. With B/CA 1.32, B/C 1.07, B/Cc - 0.99, B/Cp 1.22. B/C 1.07
Data for problems 5 to 8 Data for four mutually exclusive alternatives are given in the table below. Assume a life of 6 years and a MARR of 10%, and EUAB stands for equivalent uniform annual benefit. Alt. A Alt. B Initial Cost EUAB $140 Salvage $40 Value $560 $340 OC1.45 OD079 $100 So Alt. C $120 $40 SO Alt. D Do SO SO SO Nothing The AB/AC ratio for the third increment, (A-B) is OA 0.94 OB. 0.89
A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to be $1,000,000. It is estimated that this new equipment will save $100,000 the first year and increase gradually by $50,000 every year for the next 6 years. MARR=10% a. Using Benefit- Cost analysis, what is the Benefit/Cost ratio for this equipment purchase? b. Based on the Benefit/Cost analysis should Metro Atlanta purchase the equipment?
Each of the three mutually exclusive alternatives shown has a 5-year useful life. If the MARR is 10%, which alternative should be selected? Solve the problem by benefit-cost ratio analysis. A B Cost Uniform annual benefit $600.0 158.3 $500.0 138.7 с $200.0 58.3
With interest at 10%, what is the benefit-cost ratio for this government project? Initial Cost Additional costs at the end of year 1 and year 2 Benefits at end of year 1 and year 2 Annual benefits at end of year 3 through year 2 Enter your answer as follow 12.34 $208,355 $23,720/year $0Ayear $91.825/year
Qutestion 3 Solve this problem using the incremental Benefit - Cost ration with, expected life of 10 years and rate of return of 10% Alternative A Initial cost $50,000 Annual maintenance cost $4,000 Estimated annual benefit $15,000 Alternative B Initial cost $30,000 Annual maintenance cost $3,000 Estimated annual benefit $9,000 a. Select B with B/C=1.14 b. Select B with B/C=1.41 c. Select A with B/C=1.14 d. Reject A with B/C=1.14
1) Given the financial data for four mutually exclusive alternatives in the table below, determine the best alternative using the incremental rate of return (∆RoR) analysis. MARR =10%
Consider four alternatives A, B, C, and D with their respective annual benefits, disbenefits, costs and savings. Alternative A В Benefits P180,000 P250,000 P300,000 P400,000 Disbenefits P42,000 P68,000 P92,000 P118,000 Costs P128,000 P184,000 P265,000 P288,000 Savings P16,000 P27,000 P38,000 P54,000 Calculate the B/C ratio and (B-C) criterion for each alternative. Using the incremental B/C ratio, determine which alternative should be selected. O Select Alternative A O Select Alternative C O Select Alternative B O Select Alternative D
Example 3: Applying present worth when useful lives are equal Interest: 8%; N = 6 years Alternatives Atlas Tom Thumb Cost $2000 $3000 Uniform Annual End-of-Useful-Life Salvage Value Benefit $450 $600 $200 $700
For the following 4 options (one must be chosen), what is the smallest MARR for the "Do Nothing" option to be chosen? Option A Year O Cost ($) Years 1-10 Benefit ($) 5.26% 9.59% 7.09 % 10.69% "Do Nothing" 0 O -1,000 153 B -1,500 207 C -2,000 261
Alternatives B and C are replaced at the end of their useful lives with identical replacements. Find the best alternative using MARR = 10%. Data Initial Cost Uniform Annual Benefit Useful Life a) Benefit to Cost ratio analysis b) Payback Period Analysis Alt. A $6,00 $150 20 Alt. B $900 $300 5 Alt. C $1,800 $450 10
6. David is opening an Aerial Adventure Park. He has three mutually exclusive design alternatives: Capital investment Annual receipts Annual expenses Design A $175,000 $115,000 $70,000 Design B $350,000 $150,000 $80,000 Design C $300,000 $125,000 $70,000 Market values are negligible. A 10-year study period is to be used and the MARR is 10% per year. Use the FW Method to determine which alternative should be chosen.

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4. Using benefit-cost ratio analysis, a 10-year useful life, and a 25% MARR, determine which of the following mutually exclusive alternatives should be selected. Cost A B C D E $100 $210 $300 $400 $500 Annual Benefit $37 $60 $83 $137 $150