Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Chapter 10, Problem 6P
To determine
Calculate the benefit cost ratio.
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The federal government is considering three sites in the National Wildlife Preserve for mineralextraction. The cash flows (in millions) associated with each site are given below. Use the B/Cmethod to determine which site, if any, is best, if the extraction period is limited to 5 years andthe interest rate is 10% per year.
Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing therobotics used on the heavy truck gear line will produce total benefits of $516,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $387,000 (also in today's dollars) over that same timeperiod. An initial cash investment of $206,400 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $72,000. Show how Ken will apply marginal cost-benefit analysistechniques to determine the following:a. The marginal benefits of the proposed new robotics.b. The marginal cost of the proposed new roboticsc. The net benefit of the proposed new robotics.
As part of the rehabilitation of the downtown area of a southern U.S. city, the Parks and Recreation Department expects to develop the
space below several overpasses into basketball, handball, miniature golf, and tennis courts. The estimates are initial cost of $182,000;
life of 20 years and, annual M&O costs of $24,000. The department expects 30,000 people per year to use the facilities an average of
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B/C ratio for the project?
The B/C ratio is
Chapter 10 Solutions
Engineering Economy
Ch. 10 - The Adams Construction Company is bidding on a...Ch. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - A retrofitted space-heating system is being...Ch. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
Ch. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Four mutually exclusive projects are being...Ch. 10 - Two municipal cell tower designs are being...Ch. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - You have been requested to recommend one of the...Ch. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26FECh. 10 - Prob. 27FECh. 10 - Prob. 28FECh. 10 - A flood control project with a life of 16 years...Ch. 10 - Prob. 30FECh. 10 - Prob. 31FE
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- A proposal to reduce traffic congestion on Jounieh Highway has a B/C ratio of 1.4. The annual worth of benefits minus disbenefits is $560,000. What is the first cost of the project if the interest rate is 5% per year and the project is expected to be perpetual?* 4,000,000 4,588,208 8,000,000 6,666,667arrow_forwardKen Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $560,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today's dollars) over that same time period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Show how Ken will apply marginal cost-benefit analysis techniques to determine the following: The marginal (added) benefits of the proposed new robotics is $______________ The marginal (added) cost of the proposed new robotics is $__________________ The net benefit of the proposed new robotics isarrow_forwardWhich is the most efficient analysis method we can use for determining project acceptability on an economic basis?arrow_forward
- Some of the formal evaluation techniques used by engineers is Economic analysis. Such analyses attempt to compare the public benefits from such projects with the costs of providing them. Economic studies may be used to (give three uses):arrow_forwardThe sheriff of Los Lunas county along the Arizona- Mexico border asked the county to build a new minimum security detention facility for personscaught while attempting to enter the United States illegally. The construction cost will be $22 million, with annual operating costs of $2.1 million. The new facility will create jobs that produce benefits for many local businesses including realtors, restaurants, etc. The benefits are estimated to be $5 million in years 1 and 2, $2.8 million in year 3, and $1.12 million per year beginning in year 4 and continuing through the 30-year life of the facility. At a discount rate of 8% per year, does the conventional B/C ratio indicate that the project is economically justified?arrow_forwardFeng Seawater Desalination Systems has established a capital investment limit of $800,000 for next year for projects that target improved recovery of highly brackish groundwater. All projects have a 4-year life and the MARR is 10% per year. (a) Select any or all of the projects. (b) Project Z is a favorite of Mr. Feng. Determine the minimum NCF necessary to make Z the economically best project. (c) Use a spreadsheet to answer the two parts above. Initial Net Cash Salvage Project Investment, $ Flow, $/Year Value, $ X −250,000 50,000 45,000 Y −300,000 90,000 −10,000 Z −550,000 150,000 100,000arrow_forward
- In order to safeguard the public health, environment, public beaches, water quality, and economy of south San Diego County, California, and Tijuana, Mexico, federal agencies in the United States and Mexico developed four alternatives for treating wastewater prior to discharge into the ocean. The project will minimize untreated wastewater flows that have caused chronic and substantial pollution in the Tijuana River valley, Tijuana River National Estuarine Research Reserve, coastal areas used for agriculture and public recreation, and areas designated as critical habitat for federal and state-listed endangered species. If the costs and benefits are as shown, which alternative should be selected on the basis of a B/C analysis at 6% per year and a 40-year project period? All monetary amounts are in $ million units.arrow_forwardQ4 (i) State the salient features of the Pakistan Environmental Protection Act (PEPA) 1997.arrow_forwardAs part of the rehabilitation of the downtown area of a southern U.S. city, the Parks and Recreation Department expects to develop the space below several overpasses into basketball, handball, miniature golf, and tennis courts. The estimates are: initial cost of $190,000, life of 20 years, and annual M&O costs of $21,000. The department expects 20,000 people per year to use the facilities an average of 2 hours each. The value of the recre- ation has been conservatively set at $1.00 per hour. At a discount rate of 6% per year, what is the B/C ratio for the project? а. 1.06 b. 1.25 O c. 1.09 O d. 1.04arrow_forward
- As part of the rehabilitation of the downtown area of a southern U.S. city, the Parks and Recreation Department expects to develop the space below several overpasses into basketball, handball, miniature golf, and tennis courts. The estimates are: initial cost of $190,000, life of 20 years, and annual M&O costs of $21,000. The department expects 20,000 people per year to use the facilities an average of 2 hours each. The value of the recreation has been conservatively set at $1.00 per hour. At a discount rate of 6% per year, what is the B/C ratio for the project?arrow_forwardFrom the PW, AW, and FW values shown, the conventional B/C ratio is closest to: (а) 1.27 (b) 1. 33 (c) 1.54 PW, $ AW, $/Year FW, $ First cost 100,000 16,275 259,370 M&O cost 68,798 11,197 178,441 (d) 2. 76 Benefits 245,784 40,000 637,496 (e) Any of the above Disbenefits 30,723 5,000 79,687 a b d earrow_forwardBased on the incremental return shown and the company's MARR of 16% per year, the alternative that should be selected is _____ The project initial costs are such that A < C < B. Comparison Rate of Return, % (A-DN) (B-DN) (C-DN) (B-A) (C-A) (B-C) Alternative C Do nothing Alternative B Alternative A Cannot be determined. 17 25 19 14 18 12arrow_forward
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