
(a)
The best alternative using Benefit cost ratio.

Answer to Problem 41P
Using cost benefit ratio alternative A is beneficial.
Explanation of Solution
Given:
A | B | |
User benefits |
||
User dis-benefits |
||
First cost |
||
Operations and maintenance |
Calculation:
Calculate the cost benefit ratio.
Here, EUAB is annualised uniform benefits and EUAC is annualized uniform costs.
Calculate the EUAC for alternative A.
Substitute
EUAB is annual benefits which are
Calculate the EUAC of alternative B.
Substitute
EUAB is
Calculate the difference between the EUAC’s of two alternatives.
Substitute
Calculate the difference between the EUAB’s of two alternatives.
Calculate the benefit-cost ratio.
Substitute
Thus the incremental cost ratio is less than
Conclusion:
Using cost benefit ratio alternative A is beneficial.
(b)
The best alternative using Modified benefit cost ratio.

Answer to Problem 41P
Using Modified cost benefit ratio alternative A is beneficial.
Explanation of Solution
Calculation:
In modified benefit cost ratio the salvage value is not added to the benefits. It is deducted from the costs. Since there is no salvage value in this case, thus, the answer will remain same as of part
Conclusion:
Using Modified cost benefit ratio alternative A is beneficial.
(c)
The best alternative using the public/government version of the

Answer to Problem 41P
The best alternative using the public/government version of the
Explanation of Solution
Calculation:
Alternative A:
Benefits of public and government are calculated separately.
Calculate the present worth of the consumer’s benefits and dis-benefits.
Substitute
Calculate the present worth of governments cost.
Substitute
Calculate the benefit cost ratio.
Substitute
Thus, alternative can be accepted.
Alternative B:
Benefits of public and government are calculated separately.
Calculate the present worth of the consumer’s benefits and dis-benefits.
Substitute
Calculate the present worth of governments cost.
Substitute
Calculate the benefit cost ratio.
Substitute
Project B is also acceptable.
To chose between alternatives incremental analysis is performed.
Calculate the difference between the present worth of consumer’s benefits and disbenefits.
Calculate the difference between the present worth of government’s cost.
Calculate the benefit cost ratio.
Since the ratio is less than
Conclusion:
The best alternative using the public/government version of the
(d)
The best alternative using present worth index.

Answer to Problem 41P
The best alternative using present worth index is alternative A..
Explanation of Solution
Calculation:
Alternative A:
Calculate the present worth of A.
Write the expression to calculate the present worth for the alternative
Here, the present worth is,
Substitute
Calculate the present worth of B.
Substitute
Since the present worth of A is more thus, project A should be selected.
Conclusion:
The best alternative using present worth index is alternative A.
(e)
The consistency of data from

Explanation of Solution
The result remains consistent in all options except in the public/government version of
The alternative A must be chosen as the highest value of modified
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Chapter 9 Solutions
Engineering Economic Analysis
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