Three mutually exclusive projects are being considered by Sesame Street Productions (SSP). The project details are provided in the table below. SSP has heard about your excellent analysis skills and wants you to help them make a decision. Use a B/C analysis. SSP uses a MARR of 8%. Calculate the B/C Ratio for each project and enter your answers with two decimal places as 1.23. If there is a zero before the decimal, you must enter it as 0.12. Project A Project B Project C $600 SSP may eliminate project SSP must choose project Just enter the Project name as A, B, or C. Initial Cost Annual Benefits Project life (years) B/C Ratio $500 based on the B/C Analysis. $150 2 without performing an incremental analysis. $450 $150 4 $200 4

Three mutually exclusive projects are being considered by Sesame Street Productions (SSP). The project details are provided in the table below. SSP has heard about your excellent analysis skills and wants you to help them make a decision. Use a B/C analysis. SSP uses a MARR of 8%. Calculate the B/C Ratio for each project and enter your answers with two decimal places as 1.23. If there is a zero before the decimal, you must enter it as 0.12. Project A Project B Project C $600 SSP may eliminate project SSP must choose project Just enter the Project name as A, B, or C. Initial Cost Annual Benefits Project life (years) B/C Ratio $500 based on the B/C Analysis. $150 2 without performing an incremental analysis. $450 $150 4 $200 4

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A benefit-cost ratio is showing the relationship between the relative costs and benefits of a proposed project, expressed either in monetary or in qualitative terms. TRUE (or) FALSE
a. Based on PW method, Design Z is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design Z is more economical d. The discounted payback period of Design Y is The discounted payback period of Design Z is years (Round to one decimal place) years (Round to one decimal place) Investment cost Annual revenue Annual cost Useful life Salvage value Net PW Therefore, based on the payback period method, Design y would be preferred. (e) Why could the recommendations based on the payback period method be different from the other two methods? ⒸA. because the payback period method ignores the cash flows after the payback period O B. because the payback period gives more weight to the cash flows after the payback period C Design Y Design Z $140,000 $275,000 $57,659 $96.354 $17.618 $31,687 15…
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