The State Highway Department is considering a bypass loop that is expected to save motorists $820,000 per year in gasoline and other automobilerelated expenses. However, local businesses will experience revenue losses estimated to be $135,000 each year. The cost of the loop will be $9,000,000. (a) Calculate the conventional B/C ratio using an interest rate of 6% per year and a 20-year project period. (b) Calculate the conventional B/C ratio without considering the disbenefits. Is the project economically justified with and without considering the revenue losses? (c) Develop the single-cell spreadsheet functions that will answer the two questions above.
The State Highway Department is considering a
bypass loop that is expected to save motorists
$820,000 per year in gasoline and other automobilerelated
expenses. However, local businesses will
experience revenue losses estimated to be $135,000 each year. The cost of the loop will be $9,000,000.
(a) Calculate the conventional B/C ratio using an
interest rate of 6% per year and a 20-year project
period. (b) Calculate the conventional B/C ratio
without considering the disbenefits. Is the project
economically justified with and without considering
the revenue losses? (c) Develop the single-cell
spreadsheet functions that will answer the two
questions above.
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