Benefit-Cost Analysis B В — D %3D с с-S Cost-effectiveness Ratio CER = E Capital Cost AW CC = i PART A.) A privately funded wind-based electric power generation company in the southern part of the country has developed the following estimates (in $1,000) for a new turbine farm. The MARR is 8% per year, and the project life is 20 years. Calculate the conventional B/C. Is the project viable? 24 Time Frame 25,000 25,000 Year 0 Benefits Year 10 Savings 5,000 Years 1-20 Cost 50,000 Year 0 Disbenfits 2,000 Years 1-20
Benefit-Cost Analysis B В — D %3D с с-S Cost-effectiveness Ratio CER = E Capital Cost AW CC = i PART A.) A privately funded wind-based electric power generation company in the southern part of the country has developed the following estimates (in $1,000) for a new turbine farm. The MARR is 8% per year, and the project life is 20 years. Calculate the conventional B/C. Is the project viable? 24 Time Frame 25,000 25,000 Year 0 Benefits Year 10 Savings 5,000 Years 1-20 Cost 50,000 Year 0 Disbenfits 2,000 Years 1-20
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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Transcribed Image Text:Benefit-Cost Analysis
В в-D
C
С — S
Cost-effectiveness Ratio
C
CER =
E
Capital Cost
AW
CC =
i
PART A.) A privately funded wind-based electric power
generation company in the southern part of the country has
developed the following estimates (in $1,000) for a new
turbine farm. The MARR is 8% per year, and the project life
is 20 years. Calculate the conventional B/C. Is the project
viable?
Time Frame
25,000
Year 0
Benefits
25,000
Year 10
Savings
5,000
Years 1-20
Cost
50,000
Year 0
Disbenfits
2,000
Years 1-20
PART B.) The cost in $ per year and effectiveness measure in items per year for 4 mutually
exclusive alternatives are listed in the table below. Calculate the CER for each alternative.
PART C.) Use the process for evaluating CERS explained in the book to choose the best
alternative (or alternatives).
Alternative
2$
Effectiveness
A
350
22
B
200
18
C
660
50
100
8
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