A county will invest $3,600,000 to clean up a chemical spill that occurred following a natural disaster. At the end of the 9-year planninghorizon, an additional $900,000 will be spent in restoring the site to an environmentally acceptable condition. The investment isexpected to produce net annual benefits that will decrease by 25% each year. The net annual public benefit in the 1st year is estimated tobe $2,400,000. Determine the B/C ratio for the investment using a 5% MARR.Click here to access the TVM Factor Table calculator.|B/C=Carry all interim calculations to 5 decimal places and then round your final answer to 3 decimal places. The tolerance is ±0.003. The benefit-cost ratio (B/C) is the ratio of the present worth of net public benefits to the present worth of net government costsusing i = MARR.To illustrate the mathematics of benefit-cost analysis:Bjtnet public benefits (benefits minus disbenefits, expressed as money) associated with alternativej during year t t = 1; 2;...;n.Cit¡====net government costs (costs minus residuals such as salvage values) associated with alternativej during year t, t = 1; 2; ...;n.n length of the planning horizon.appropriate interest or discount rate.B/C, (t) ==The B/C criterion may be expressed mathematically, using the present worth of all net benefits over the present worth of all netcosts, asΣ1 B (1 + x) =*Σo C(1+1)*

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Answered: A county will invest $3,600,000 to…

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

Problem 1PS

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A county will invest $4,800,000 to clean up a chemical spill that occurred following a natural disaster. At the end of the 9-year planning horizon, an additional $1,200,000 will be spent in restoring the site to an environmentally acceptable condition. The investment is expected to produce net annual benefits that will decrease by 25% each year. The net annual public benefit in the 1st year is estimated to be $3,000,000. Determine the B/C ratio for the investment using a 6% MARR. Click here to access the TVM Factor Table calculator. B/C = Carry all interim calculations to 5 decimal places and then round your final answer to 3 decimal places. The tolerance is ±0.003.
Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.The roadway to be constructed is projected to cost $125,000 per lane mile. It will need to begin construction 12 months prior to the project’s estimated completion date. Your government controls the permitting process for the roadway and has already issued the necessary permits. The total roadway project will be paid for at its completion
A local municipality is considering investing $210,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 15-year period as shown in the cash flow profile given below in thousands of dollars. Notice, an intermediate investment of $130,000 is anticipated in the 6th year of the investment. Based on a MARR of 3%, use benefit-cost ratio analysis to determine whether the investment should be made. (All values in thousand dollars) End-of Year Net Cash Costs Benefits Flow 0 $210 -$210 1 $70 $115 $45 2 $70 $125 $55 3 $70 $135 $65 4 $70 $145 $75 5 $70 $155 $85 67 $200 $165 -$35 $70 $155 $85 8 $70 $145 $75 6 $70 $135 $65 10 $70 $125 $55 11 $70 $115 $45 12 $70 05 $35 W 13 $70 $95 $25 14 $70 $85 $15 15 $70 $75 $5 Click here to access the TVM Factor Table calculator. B/C- final answer to 4 decimal places. The tolerance is 10.0003.
A local municipality is considering investing $220,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 7-year period as shownin the cash flow profhle given below in thousands of dollars. Notice, an intermediate investment of $140,000 is anticipated in the 6th year of the investment. Based on a MARR of 5%, calculate the benefit-cost ratio of the investment. Round answer to two decimal places. (All values in thousand dollars) End-of Year Costs Benefits Net Cash Flow $220 -$220 $70 $120 $50 $70 $130 $60 $70 $140 $70 4 $70 $150 $80 $70 $160 $90 $210 $170 -$40 7. $70 $160 $90 1.45 2. in
A local municipality is considering investing $270,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 7-year period as shown in the cash flow profile given below (in thousands of dollars). Notice, an intermediate investment of $180,000 is anticipated in the 6th year of the investment. Based on a MARR of 6%, calculate the benefit-cost ratio of the investment. Round answer to two decimal places
A state government is considering construction of a flood control dike having a life span of 15 years. History indicates that a flood occurs every five years and causes $600,000 in damages, on average. If the state uses aMARR of 12% per year and expects every public-works project to have a B–C ratio of at least 1.0, what is the maximum investment that will be allowed for the dike? Assume that the flood occurs in the middle of each five-year period. (a) $1,441,000 (b) $643,000 (c) $843,000 (d) $4,087,000 (e) $1,800,000.
A city has decided to build a sofiball complex, and the city council has already voted to fund the project at the level of $800,000 (initial capital investment). The city engineer has collected the following financial information for the complex project:• Annual upkeep costs: $120.000• Annual utility costs: $13,000• Renovation costs: $50,000 for every five years• Annual team user fees (revenues): $32,000• Useful life: Infinite• interest rate: 8%lf the city can expect 40.000 visitors to the complex each year, what should be the minimum ticket price per person so that 1he city can break even'?
A municipality is planning on constructing a water treatment plant at an initial cost of $10,000,000. Every 5 years, major repairs and cleanup are required at a cost of $2,000,000. Due to the necessity to remove sludge and make minor repairs, annual costs of operating the treatment plant are estimated to be $700,000, $775,000, $850,000, $925,000, and $1,000,000 each year leading up to the 5-year major repair and cleanup. Based on a 4%/year TVOM, what is the capitalized cost for the water treatment plant?
A city engineer must find the capitalizd cost of perpetual service from a water plant. A storage tank that costs $40,000 is needed now. In ten years, a second $60,000 tank will be needed. At that time, a $7000 pumping system with life of eight years will be installed. Pump maintenance and operation costs are $800 the first year, $900 the second, and increases by $100 each year for the eight-year life. There is no salvage value. Use 10% to find the capitalized cost.
There are two mutually exclusive proposals for a for a flood control project in Illinois. The first proposal involves an initial outlay of $1,350,000 and annual expenses of $110,000. This plan is assumed to be permanent. The second proposal requires an initial outlay of $700,000, followed by $200,000 every 12 years thereafter. Annual expenses for the second proposal are estimated to be $95,000 for the first 12 years and $150,000 each year there after. Annual benefits are identical for both projects, and terminal salvage values are negligible. The interest rate is 6% per year. Which proposal should be recommended?
The city of Peachtree is comparing the following two plans for supplying water to a newly developed subdivision:1 Plan A will manage requirements for the next 15 years; at the end of thatperiod, the initial cost of $1,500,000 will have to be doubled to meet the requirements of subsequent years. The facilities installed in years 0 and15 may be considered permanent; however, certain supporting equipmentwill have to be replaced every 30 years from the installation dates at a costof $200,000. Operating costs are $91,000 a year for the first 15 years and$182,000 thereafter. Beginning in the 21st year, they will increase by $3,000a year.2 Plan B will supply all requirements for water indefinitely into the future,although it will operate at only half capacity for the first 15 years. Annualcosts over this period will be $105,000 and will increase to $155,000 beginning in the 16th year. The initial cost of Plan Bis $1,950,000; the facilities can be considered permanent, although it will be…
Green County is planning to construct a bridge across the south branch of Carey Creek to facilitate traffic flow though Clouser Canyon. The first cost for the bridge will be $9,500,000. Annual maintenance and repairs the first year of operation, estimated to be $10,000, are expected to increase by $1000 each year thereafter. In addition to regular maintenance, every 5 years the roadway will be resurfaced at a cost of $750,000, and the structure must be painted every 3 years at a cost of $100,000. If Green County uses 5% as its cost of money and the bridge is expected to last for 20 years, what is the EUAC?

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