The U.S. Department of Interior is planning to build a dam and construct a hydro-electric 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 AlternativesBAC$100M $160M $220M$ 40M$20M$ 60M$8M$18M$25M000Initial InvestmentAnnual recurring benefitsAnnual Recurring costsSalvage valueThe interest rate is 5%, and the life of each project is estimated to be 40 years.a) Find the benefit-cost ratio for each alternative.b) Select the best alternative, according to BC(i). (Hint: use incremental analysis)

BC ratio i.e. Benefit cost ratio is the ratio between annual benefits received for every unit of the…

Answered: Design Alternatives A B $100M $160M…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The U.S. Department of Interior is planning to build a dam and construct a hydro- electric 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
B
A
C
$100M $160M $220M
$ 40M
$20M
$ 60M
$8M
$18M
$25M
0
0
0
Initial Investment
Annual recurring benefits
Annual Recurring costs
Salvage value
The interest rate is 5%, and the life of each project is estimated to be 40 years.
a) Find the benefit-cost ratio for each alternative.
b) Select the best alternative, according to BC(i). (Hint: use incremental analysis)

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