In a city by a river, flood damage to businesses and homes averages $5,000,000 per year. A proposed levee system would prevent all flood damage, at a cost of $50,000,000 to construct and $3,000,000 per year for maintenance and interest. The city proposes to finance the construction by selling bonds; these bonds would have a 20-year term and pay 6% interest on par value. The bonds will be renewed at maturity for the same term and at the same interest rate. The benefit-cost ratio for the levee system is A. less than 0.5 B. greater than 0.5 but less than 1.0 C. greater than 1.0 but less than 1.5 D. greater than 1.5

In a city by a river, flood damage to businesses and homes averages $5,000,000 per year. A proposed levee system would prevent all flood damage, at a cost of $50,000,000 to construct and $3,000,000 per year for maintenance and interest. The city proposes to finance the construction by selling bonds; these bonds would have a 20-year term and pay 6% interest on par value. The bonds will be renewed at maturity for the same term and at the same interest rate. The benefit-cost ratio for the levee system is A. less than 0.5 B. greater than 0.5 but less than 1.0 C. greater than 1.0 but less than 1.5 D. greater than 1.5

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In a city by a river, flood damage to businesses and
homes averages $5,000,000 per year. A proposed levee
system would prevent all flood damage, at a cost of
$50,000,000 to construct and $3,000,000 per year for
maintenance and interest. The city proposes to finance
the construction by selling bonds; these bonds would
have a 20-year term and pay 6% interest on par value.
The bonds will be renewed at maturity for the same term
and at the same interest rate. The benefit-cost ratio for
the levee system is
A. less than 0.5
B. greater than 0.5 but less than 1.0
C. greater than 1.0 but less than 1.5
D. greater than 1.5

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