At 10% interest, what is the nearest benefit/cost ratio for the following private sector project?**Project Details:**- **Initial Cost:** $200,000- **Additional Costs at the End of Year 1-2:** $30,000- **Annual Benefits at the End of Year 1-10:** $90,000- **Salvage Value:** $40,000- **Project Life:** 10 years**Note:** Consider the following equation setup:- **FW(Benefits) = Annual Benefits ⋅ (F/A, 10%, 10)**- **FW(Costs) = Initial Costs + Additional Costs ⋅ (F/P, 10%, 8) − Salvage Value****10% Compound Interest Factors Chart:**| Year | F/P | P/F | P/A | A/F | A/P | F/A | P/A ||------|------|-------|-------|-------|-------|-------|-------|| 1 | 1.100| 0.9091| 1.0000| 1.0000| 1.0000| 1.0000| 0.909 || 2 | 1.210| 0.8264| 0.4762| 0.5762| 2.100 | 1.736 | || 3 | 1.331| 0.7513| 0.3021| 0.4021| 3.310 | 2.487 | || 4 | 1.464| 0.6830| 0.2155| 0.3155| 4.641 | 3.170 | || 5 | 1.611| 0.6209| 0.1638| 0.2638| 6.105 | 3.791 | || 6 | 1.772| 0.5645| 0.1296| 0.2296| 7.716 | 4.355 | || 7 | 1.949| 0.5132| 0.1029| 0.2029| 9.487 | 4.868 | ||

While choosing which investment will be undertaken, different appraisal techniques are used.…

Answered: O 2.34 O 2.255 O 2.19 O 0.13

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O 2.34 O 2.255 O 2.19 O 0.13

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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Question

100%

At 10% interest, what is the nearest benefit/cost ratio for the following private sector project?

**Project Details:**

- **Initial Cost:** $200,000
- **Additional Costs at the End of Year 1-2:** $30,000
- **Annual Benefits at the End of Year 1-10:** $90,000
- **Salvage Value:** $40,000
- **Project Life:** 10 years

**Note:** Consider the following equation setup:

- **FW(Benefits) = Annual Benefits ⋅ (F/A, 10%, 10)**
- **FW(Costs) = Initial Costs + Additional Costs ⋅ (F/P, 10%, 8) − Salvage Value**

**10% Compound Interest Factors Chart:**

| Year | F/P | P/F | P/A | A/F | A/P | F/A | P/A |
|------|------|-------|-------|-------|-------|-------|-------|
| 1 | 1.100| 0.9091| 1.0000| 1.0000| 1.0000| 1.0000| 0.909 |
| 2 | 1.210| 0.8264| 0.4762| 0.5762| 2.100 | 1.736 | |
| 3 | 1.331| 0.7513| 0.3021| 0.4021| 3.310 | 2.487 | |
| 4 | 1.464| 0.6830| 0.2155| 0.3155| 4.641 | 3.170 | |
| 5 | 1.611| 0.6209| 0.1638| 0.2638| 6.105 | 3.791 | |
| 6 | 1.772| 0.5645| 0.1296| 0.2296| 7.716 | 4.355 | |
| 7 | 1.949| 0.5132| 0.1029| 0.2029| 9.487 | 4.868 | |
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