Q1: In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are as follows: PW ($000s) Plan Costs Benefits A $123,000 $139,000 В 135,000 150,000 C 99,000 114,000 a) Compute which plans 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 10% of the costs of each plan are reclassified as disbenefits. Calculate percentage change in the B–C ratio of each plan results from the reclassification? c) Justify & Comment on why the rank-orderings in (a) are unaffected by the change in (b).
Q1: In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are as follows: PW ($000s) Plan Costs Benefits A $123,000 $139,000 В 135,000 150,000 C 99,000 114,000 a) Compute which plans 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 10% of the costs of each plan are reclassified as disbenefits. Calculate percentage change in the B–C ratio of each plan results from the reclassification? c) Justify & Comment on why the rank-orderings in (a) are unaffected by the change in (b).
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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Transcribed Image Text:Q1: In the development of a publicly owned, commercial waterfront area, three possible independent
plans are being considered. Their costs and estimated benefits are as follows:
PW ($000s)
Plan
Costs
Benefits
A
$123,000
$139,000
В
135,000
150,000
C
99,000
114,000
a) Compute which plans 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 10% of the costs of each plan are reclassified as disbenefits. Calculate percentage
change in the B–C ratio of each plan results from the reclassification?
c) Justify & Comment on why the rank-orderings in (a) are unaffected by the change in (b).
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