The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees and shrubbery, as well as maintaining the greenway, are summarized below. The city's discount rate is 6% per year, and the planning horizon is 7 years. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 6% per year. Initial planting cost Annual maintenance expense Annual community benefits Landscaping plan A B C $65,000 $47,000 $72,000 4,700 5,200 3,900 20,000 17,000 19,500 a. Use the B-C ratio method to recommend the best plan when annual maintenance expenses offset annual benefits in the numerator. Perform the incremental B-C Analysis. Fill-in the table below. (Round to four decimal places.) Alternative B A C Inc. B-C ratio 1.4015 Is the alternative acceptable? Yes 1.0855 Yes 0.2392 No When annual maintenance expenses offset annual benefits in the numerator, A is the best plan b. Repeat Part (a) when annual maintenance expenses add to total costs in the denominator. Which plan is best?
The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees and shrubbery, as well as maintaining the greenway, are summarized below. The city's discount rate is 6% per year, and the planning horizon is 7 years. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 6% per year. Initial planting cost Annual maintenance expense Annual community benefits Landscaping plan A B C $65,000 $47,000 $72,000 4,700 5,200 3,900 20,000 17,000 19,500 a. Use the B-C ratio method to recommend the best plan when annual maintenance expenses offset annual benefits in the numerator. Perform the incremental B-C Analysis. Fill-in the table below. (Round to four decimal places.) Alternative B A C Inc. B-C ratio 1.4015 Is the alternative acceptable? Yes 1.0855 Yes 0.2392 No When annual maintenance expenses offset annual benefits in the numerator, A is the best plan b. Repeat Part (a) when annual maintenance expenses add to total costs in the denominator. Which plan is best?
Chapter1: Making Economics Decisions
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Transcribed Image Text:The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway
Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees
and shrubbery, as well as maintaining the greenway, are summarized below. The city's discount rate is 6% per year,
and the planning horizon is 7 years.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 6% per year.
Initial planting
cost
Annual maintenance
expense
Annual community
benefits
Landscaping plan
A
B
C
$65,000 $47,000 $72,000
4,700 5,200 3,900
20,000 17,000 19,500
a. Use the B-C ratio method to recommend the best plan when annual maintenance expenses offset annual benefits in the numerator.
Perform the incremental B-C Analysis. Fill-in the table below. (Round to four decimal places.)
Alternative
B
A
C
Inc. B-C ratio
1.4015
Is the alternative acceptable?
Yes
1.0855
Yes
0.2392
No
When annual maintenance expenses offset annual benefits in the numerator, A
is the best plan
b. Repeat Part (a) when annual maintenance expenses add to total costs in the denominator. Which plan is best?
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