Gehaz Zayed City is advancing a project for the construction of a new Service Cluster System in the new extension to attract new commerce to the city. The responsible committee has developed the following estimates for the effects of the project: Cost to wreck and remove current facilities 829000 Material, labour, and overhead for new construction 2787000 Annual operating and maintenance expenses 197000 Annual benefits from new commerce 508000 Annual disbenefits to sportsmen in area 30000 Project life 23 Interest rate 0.09 Calculate a) the conventional benefit-cost ratio using PW. b) the modified benefit-cost ratio using PW Should the project be funded?
Gehaz Zayed City is advancing a project for the construction of a new Service Cluster System in the new extension to attract new commerce to the city. The responsible committee has developed the following estimates for the effects of the project: Cost to wreck and remove current facilities 829000 Material, labour, and overhead for new construction 2787000 Annual operating and maintenance expenses 197000 Annual benefits from new commerce 508000 Annual disbenefits to sportsmen in area 30000 Project life 23 Interest rate 0.09 Calculate a) the conventional benefit-cost ratio using PW. b) the modified benefit-cost ratio using PW Should the project be funded?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Gehaz Zayed City is advancing a project for the construction of a new Service Cluster System in the new extension to attract new commerce to the city. The responsible committee has
developed the following estimates for the effects of the project:
Cost to wreck and remove current facilities
829000
Material, labour, and overhead for new construction
2787000
Annual operating and maintenance expenses
197000
Annual benefits from new commerce
508000
Annual disbenefits to sportsmen in area
30000
Project life
23
Interest rate
0.09
Calculate
a) the conventional benefit-cost ratio using PW
b) the modified benefit-cost ratio using PW
Should the project be funded?
1 for Yes / 2 for No.
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