In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are given in the table to the right. a. Which plan(s) should be adopted, if any, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required investment is at least 1.0? b. Suppose that 15% of the costs of each plan are reclassified as disbenefits. What percentage change in the B-C ratio of each plan results from the reclassification? c. Comment on why the rank-orderings in (a) are unaffected by the change in (b). Plan A B C PW ($000s) Costs $97,000 119,000 130,000 Benefits $149,000 105,000 136,000
In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are given in the table to the right. a. Which plan(s) should be adopted, if any, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required investment is at least 1.0? b. Suppose that 15% of the costs of each plan are reclassified as disbenefits. What percentage change in the B-C ratio of each plan results from the reclassification? c. Comment on why the rank-orderings in (a) are unaffected by the change in (b). Plan A B C PW ($000s) Costs $97,000 119,000 130,000 Benefits $149,000 105,000 136,000
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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In the development of a publicly owned, commercial waterfront area,
possible independent plans are being considered. Their costs and estimated
benefits are given in the table to the right.
a. Which plan(s) should be adopted, if any, if the controlling board wishes to
invest any amount required, provided that the B-C ratio on the required
investment is at least 1.0?
b. Suppose that 15% of the costs of each plan are reclassified as disbenefits.
What percentage change in the B-C ratio of each plan results from
the reclassification?
c. Comment on why the rank-orderings in (a) are unaffected by the change
in (b).
Plan
ABC
PW ($000s)
Costs
Benefits
$97,000 $149,000
119,000
105,000
130,000
136,000
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