7.15 A project to extend canals for vegetable crop irri- gation into an area that was recently cleared of Mesquite trees (a nuisance tree in Texas) and large weeds is projected to have a capital cost of $2,000,000. Annual maintenance and operation costs will be $100,000 per year. Annual favorable consequences to the general public of $820,000 per year will be offset to some extent by annual adverse consequences of $400,000 to a portion of the general public. If the project is assumed to have a 20-year life, what is the conventional B/C ratio at an interest rate of 8% per year? ? 7

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 15P
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7.15 A project to extend canals for vegetable crop irri-
gation into an area that was recently cleared of
Mesquite trees (a nuisance tree in Texas) and large
weeds is projected to have a capital cost of
$2,000,000. Annual maintenance and operation
costs will be $100,000 per year. Annual favorable
consequences to the general public of $820,000
per year will be offset to some extent by annual
adverse consequences of $400,000 to a portion of
the general public. If the project is assumed to
have a 20-year life, what is the conventional B/C
ratio at an interest rate of 8% per year?
?
7
Transcribed Image Text:7.15 A project to extend canals for vegetable crop irri- gation into an area that was recently cleared of Mesquite trees (a nuisance tree in Texas) and large weeds is projected to have a capital cost of $2,000,000. Annual maintenance and operation costs will be $100,000 per year. Annual favorable consequences to the general public of $820,000 per year will be offset to some extent by annual adverse consequences of $400,000 to a portion of the general public. If the project is assumed to have a 20-year life, what is the conventional B/C ratio at an interest rate of 8% per year? ? 7
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