
(a)
The alternative to be selected using benefit cost ratio and the incremental benefit cost ratio.

Answer to Problem 42P
The alternative to be selected is Alternative
The incremental
Explanation of Solution
Given:
MARR is
Useful life is
Calculation:
Write the expression to calculate the present worth of the cost.
Here, the annual operation and maintenance cost is
Calculate the present worth cost of the alternative Expand.
Substitute
Calculate the present worth cost of the alternative New school.
Substitute
Calculate the present worth benefit of the alternative Expand.
Write the expression to calculate the annual benefit.
Here, the annual benefit is
Calculate the present worth benefit for the Expand.
Substitute
Calculate the present worth benefit for the New school.
Substitute
Write the expression to calculate the benefit-cost ratio.
Here, the present worth benefit is
For Alternative Expand.
Substitute
For Alternative New school.
Substitute
Since the
Hence, the alternative New school is desirable.
Calculate the incremental ratio.
Here the incremental cost between the alternative Expand and New school is
Substitute
Calculate the
Here the incremental benefit between the alternative Expand and New school is
Substitute
Calculate the incremental benefit-cost ratio
Substitute
Conclusion:
The alternative to be selected is Alternative
The incremental
(b)
The alternative to be selected using modified benefit cost ratio and the incremental benefit cost ratio.

Answer to Problem 42P
The alternative to be selected is Alternative
The incremental
Explanation of Solution
Given:
MARR is
Useful life is
Calculation:
Calculate the present worth benefit of the alternative
Write the expression to calculate the annual benefit.
Here, the annual benefit is
Calculate the present worth benefit for the
Substitute
Calculate the present worth benefit for the
Substitute
Write the expression to calculate the benefit-cost ratio.
Here, the present worth benefit is
For Alternative
Substitute
For Alternative
Substitute
Since the
Hence, the alternative
Calculate the incremental ratio.
Here the incremental cost between the alternative
Substitute
Calculate the
Here the incremental benefit between the alternative
Substitute
Calculate the incremental benefit-cost ratio
Substitute
Conclusion:
The alternative to be selected is Alternative
The incremental
(c)
The alternative to be selected using public government version of benefit cost ratio.

Answer to Problem 42P
The alternative to be selected is Alternative
Explanation of Solution
Given:
MARR is
Useful life is
Calculation:
Write the expression to calculate the present worth of the government cost.
Here, the annual operation and maintenance cost is
Calculate the present worth cost of the alternative
Substitute
Calculate the present worth government cost of the alternative
Substitute
Calculate the present worth benefit of the alternative
Write the expression to calculate the annual benefit of the public.
Here, the annual benefit is
Calculate the present worth public benefit for the
Substitute
Calculate the present worth public benefit for the
Substitute
Write the expression to calculate the benefit-cost ratio.
Here, the present worth public benefit is
For Alternative
Substitute
For Alternative
Substitute
Since the
Hence, the alternative
(d)
The alternative to be selected using present worth index.

Answer to Problem 42P
The alternative to be selected is Alternative
Explanation of Solution
Given:
MARR is
Useful life is
Calculation:
Write the expression to calculate the present worth for the alternative
Here, the present worth is
Substitute
Calculate the present worth for alternative
Substitute
The present worth of alternative
Hence, the alternative
Conclusion:
The alternative to be selected is Alternative
(e)
The consistency of data from

Explanation of Solution
Yes, the result remain constant throughout from
The modified benefit cost ratio gives the highest value with an incremental benefit-cost ratio of
(f)
The ethical issues involved in the overcrowded schools dilemma in terms of stakeholders and impacts.

Explanation of Solution
The ethical issues involved in overcrowded school are as follows:
Physiological Problems: Overcrowded classroom reduces the quality of air for the individual breathe which is not good for the health of any individual.
Temperature also influences social behaviour like aggression, impatience.
Psychological and Sociological Problem: The personal and social development of individual are not improved which is one of the basic principles of sending an individual to school.
The impacts of overcrowded school are as follows:
The academic performances of the individuals become poor.
The health of student is at risk.
The Moral corruption of the students as they are not fed with proper moral teachings.
Moreover, there is a lot of stress on teachers to teach such a large gathering of students.
Want to see more full solutions like this?
Chapter 9 Solutions
Engineering Economic Analysis
- Evaluate the effectiveness of supply and demand models in predicting labor market outcomes. Justify your assessment with specific examples from real-world labor markets.arrow_forwardExplain the difference between Microeconomics and Macroeconomics? 2.) Explain what fiscal policy is and then explain what Monetary Policy is? 3.) Why is opportunity cost and give one example from your own of opportunity cost. 4.) What are models and what model did we already discuss in class? 5.) What is meant by scarcity of resources?arrow_forward2. What is the payoff from a long futures position where you are obligated to buy at the contract price? What is the payoff from a short futures position where you are obligated to sell at the contract price?? Draw the payoff diagram for each position. Payoff from Futures Contract F=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Shortarrow_forward
- 3. Consider a call on the same underlier (Cisco). The strike is $50.85, which is the forward price. The owner of the call has the choice or option to buy at the strike. They get to see the market price S1 before they decide. We assume they are rational. What is the payoff from owning (also known as being long) the call? What is the payoff from selling (also known as being short) the call? Payoff from Call with Strike of k=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Shortarrow_forward4. Consider a put on the same underlier (Cisco). The strike is $50.85, which is the forward price. The owner of the call has the choice or option to buy at the strike. They get to see the market price S1 before they decide. We assume they are rational. What is the payoff from owning (also known as being long) the put? What is the payoff from selling (also known as being short) the put? Payoff from Put with Strike of k=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Shortarrow_forwardThe following table provides information on two technology companies, IBM and Cisco. Use the data to answer the following questions. Company IBM Cisco Systems Stock Price Dividend (trailing 12 months) $150.00 $50.00 $7.00 Dividend (next 12 months) $7.35 Dividend Growth 5.0% $2.00 $2.15 7.5% 1. You buy a futures contract instead of purchasing Cisco stock at $50. What is the one-year futures price, assuming the risk-free interest rate is 6%? Remember to adjust the futures price for the dividend of $2.15.arrow_forward
- 5. Consider a one-year European-style call option on Cisco stock. The strike is $50.85, which is the forward price. The risk-free interest rate is 6%. Assume the stock price either doubles or halves each period. The price movement corresponds to u = 2 and d = ½ = 1/u. S1 = $100 Call payoff= SO = $50 S1 = $25 Call payoff= What is the call payoff for $1 = $100? What is the call payoff for S1 = $25?arrow_forwardMC The diagram shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20-year patent on its production. Assume this pharmaceutical firm charges a single price for its drug. At its profit-maximizing level of output, it will generate a total profit represented by OA. areas J+K. B. areas F+I+H+G+J+K OC. areas E+F+I+H+G. D. - it is not possible to determine with the informatio OE. the sum of areas A through K. (...) Po P1 Price F P2 E H 0 G B Q MR D ōarrow_forwardPrice Quantity $26 0 The marketing department of $24 20,000 Johnny Rockabilly's record company $22 40,000 has determined that the demand for his $20 60,000 latest CD is given in the table at right. $18 80,000 $16 100,000 $14 120,000 The record company's costs consist of a $240,000 fixed cost of recording the CD, an $8 per CD variable cost of producing and distributing the CD, plus the cost of paying Johnny for his creative talent. The company is considering two plans for paying Johnny. Plan 1: Johnny receives a zero fixed recording fee and a $4 per CD royalty for each CD that is sold. Plan 2: Johnny receives a $400,000 fixed recording fee and zero royalty per CD sold. Under either plan, the record company will choose the price of Johnny's CD so as to maximize its (the record company's) profit. The record company's profit is the revenues minus costs, where the costs include the costs of production, distribution, and the payment made to Johnny. Johnny's payment will be be under plan 2 as…arrow_forward
- Which of the following is the best example of perfect price discrimination? A. Universities give entry scholarships to poorer students. B. Students pay lower prices at the local theatre. ○ C. A hotel charges for its rooms according to the number of days left before the check-in date. ○ D. People who collect the mail coupons get discounts at the local food store. ○ E. An airline offers a discount to students.arrow_forwardConsider the figure at the right. The profit of the single-price monopolist OA. is shown by area D+H+I+F+A. B. is shown by area A+I+F. OC. is shown by area D + H. ○ D. is zero. ○ E. cannot be calculated or shown with just the information given in the graph. (C) Price ($) B C D H FIG шо E MC ATC A MR D = AR Quantityarrow_forwardConsider the figure. A perfectly price-discriminating monopolist will produce ○ A. 162 units and charge a price equal to $69. ○ B. 356 units and charge a price equal to $52 for the last unit sold only. OC. 162 units and charge a price equal to $52. OD. 356 units and charge a price equal to the perfectly competitive price. Dollars per Unit $69 $52 MR 162 356 Output MC Darrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education





