Four mutually exclusive projects are being considered for a new 2-mile jogging track. The life of the track is expected to be 90 years, and the sponsoring agency's MARR is 12% per year. Annual benefits to the public have been estimated by an advisory committee and are shown below. Use the B-C method (incrementally) to select the best jogging track. A Initial cost $150,000 Annual benefits $19,000 B-C ratio 1.06 Alternative Alternative D B $57,000 $8,500 1.24 с $64,000 $10,000 1.30 D $51,000 $7,000 1.14 Perform the incremental B-C Analysis. Fill-in the table below. (Round to two decimal places.) Inc. B-C ratio Is the alternative acceptable? 1.14 Yes
Four mutually exclusive projects are being considered for a new 2-mile jogging track. The life of the track is expected to be 90 years, and the sponsoring agency's MARR is 12% per year. Annual benefits to the public have been estimated by an advisory committee and are shown below. Use the B-C method (incrementally) to select the best jogging track. A Initial cost $150,000 Annual benefits $19,000 B-C ratio 1.06 Alternative Alternative D B $57,000 $8,500 1.24 с $64,000 $10,000 1.30 D $51,000 $7,000 1.14 Perform the incremental B-C Analysis. Fill-in the table below. (Round to two decimal places.) Inc. B-C ratio Is the alternative acceptable? 1.14 Yes
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:### Project Evaluation for a New Jogging Track
Four mutually exclusive projects are under consideration for the construction of a new 2-mile jogging track. The expected lifespan of the track is 90 years, with the sponsoring agency’s Minimum Attractive Rate of Return (MARR) set at 12% per year. The estimated annual benefits to the public are presented below, and the Benefit-Cost (B-C) method is used incrementally to determine the optimal jogging track option.
#### Project Alternatives:
| Alternative | Initial Cost | Annual Benefits | B-C Ratio |
|-------------|--------------|-----------------|-----------|
| A | $150,000 | $19,000 | 1.06 |
| B | $57,000 | $8,500 | 1.24 |
| C | $64,000 | $10,000 | 1.30 |
| D | $51,000 | $7,000 | 1.14 |
#### Incremental Benefit-Cost (B-C) Analysis:
Participants are asked to perform the incremental B-C analysis using the information provided. This analysis helps decide whether an alternative is financially justifiable.
| Alternative | Incremental B-C Ratio | Is the Alternative Acceptable? |
|-------------|----------------------|--------------------------------|
| D | 1.14 | Yes |
The analysis involves comparing the incremental B-C ratios to the MARR to determine if each alternative provides a sufficient return to warrant investment.
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