8s.8 The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power plant. In addition to producing electric power, this project will provide flood control, irrigation, and recreational benefits. The estimated benefits and costs expected to be derived from the three alternatives under consideration are listed as follows: Design Alternatives A В Initial investment $100M $160M $220M Annual recurring benefits $20M $40M $55M Annual recurring costs $8M $18M $25M | Salvage value The interest rate is 5%, and the life of each project is estimated to be 40 years. Which one of the followings is most correct? Select B as its BC ratio is the largest among the three alternatives. b. Select C as its incremental BC ratio over either A or B exceeds 1. c. Select A as it requires the least investment and recurring annul cost. d. Select B as its incremental BC ratio over A exceeds 1.
8s.8 The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power plant. In addition to producing electric power, this project will provide flood control, irrigation, and recreational benefits. The estimated benefits and costs expected to be derived from the three alternatives under consideration are listed as follows: Design Alternatives A В Initial investment $100M $160M $220M Annual recurring benefits $20M $40M $55M Annual recurring costs $8M $18M $25M | Salvage value The interest rate is 5%, and the life of each project is estimated to be 40 years. Which one of the followings is most correct? Select B as its BC ratio is the largest among the three alternatives. b. Select C as its incremental BC ratio over either A or B exceeds 1. c. Select A as it requires the least investment and recurring annul cost. d. Select B as its incremental BC ratio over A exceeds 1.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:8s.8 The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power plant. In addition to producing electric power,
this project will provide flood control, irrigation, and recreational benefits. The estimated benefits and costs expected to be derived from the three
alternatives under consideration are listed as follows:
Design Alternatives
A
B
C
Initial investment
$100M
$160M
$220M
Annual recurring benefits
$20M
$40M
$55M
Annual recurring costs
$8M
$18M
$25M
Salvage value
The interest rate is 5%, and the life of each project is estimated to be 40 years. Which one of the followings is most correct?
a. Select B as its BC ratio is the largest among the three alternatives.
b. Select C as its incremental BC ratio over either A or B exceeds 1.
c. Select A as it requires the least investment and recurring annul cost.
d. Select B as its incremental BC ratio over A exceeds 1
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