Below are the annual costs and benefits of four alternative road projects. Apply the incremental B/C method to find the preferred alternative. All projects have equal lifetimes and all can be repeated. Project Alternative Annual Benefits Annual Costs A 20.5M 15.6M B 17.6M 14.2M C 13.8M 11.6M D 18.1M 13.4M

Below are the annual costs and benefits of four alternative road projects. Apply the incremental B/C method to find the preferred alternative. All projects have equal lifetimes and all can be repeated. Project Alternative Annual Benefits Annual Costs A 20.5M 15.6M B 17.6M 14.2M C 13.8M 11.6M D 18.1M 13.4M

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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Solve this problem using the incremental Benefit - Cost ration with, expected life of 10 years and rate of return of 10% Alternative A Initial cost Annual maintenance cost Estimated annual benefit $50,000 $4,000 $10,000 Alternative B Initial cost $30,000 Annual maintenance cost $3,000 Estimated annual benefit $9,000 a. Select A with B/C =1.14 b. Select B with B/C 1.14 OC. Select B with B/C = 0.14 O d. Reject A with B/C = 1.14
:[A] { > Incremental analysis ([ B Alternative], [B wins ]): C A company considering 2 different machines at MARR at 12% Both life spans = 10 years Initial Cost Annual Operating lost Benefits per yin ar Salvage Value \table MM If you are and of frying investment to company decide More than 2 alternatives if the additional increment is worth while, compare Alternative: A Incremental analysis (Alternative) pairs then B C A MARR Company at Considering 2 different machines at 12% Both life spans = 10 years. M/C X м/с у Initial Cost 160000 285000 Annual Operating Cost Benefits per year Salvage Value 45 000 90000 45000 105000 20000 40000
A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to be $1,000,000. It is estimated that this new equipment will save $100,000 the first year and increase gradually by $50,000 every year for the next 6 years. MARR=10% a. Using Benefit- Cost analysis, what is the Benefit/Cost ratio for this equipment purchase? b. Based on the Benefit/Cost analysis should Metro Atlanta purchase the equipment?
Evaluate the two alternatives A and B and decide the economic justified alternative using: Present worth method Annual worth method Future worth method I.R.R method E.R.R Method E.R.R.R method M.A.R.R = 15% the details of alternatives are shown in the table below Alternatives A Investments $6,000 $7,500 Useful life (years) 10 Annual disbursements $2,500 $3,500 Annual revenues $4,500 $6,000 Salvage values $500 $1,000
A Clinical Laboratory plans to build a waste water management installation (IPAL) independently. For waste distribution needs, two types of specifications are considered which must be selected according to the conditions: Initial cost of the pipe Technical lifetime of the pipe Initial cost of equipment Technical lifetime of the equipment Energy costs for pumps per year Increase in energy costs for pumps every year Pipe X $ 1.200 million 60 years $ 150 million 20 years $ 30 million $ 0,6 million Pipe Y $800 million 30 years $ 200 million 20 years $ 40 million $ 0,8 million The cost of rejuvenation over 60 years is the same as the initial cost. The analysis period is 60 years, then compare Equivalent Uniform Annual Cost (X) with Equivalent Uniform Annual Cost (Y) assuming an analysis interest rate of 10% and a residual value for pipes and equipment is zero.
Calculate the annual net benefit from the given project summary. Capital Costs = $43,000; Revenue = $16,000/year; Operation and Maintenance Costs = $7,800/year Salvage Value = $19,000; Project Lifetime = 6 years; Effective Interest Rate = 0.09.
The cash flows for three mutually exclusive alternatives are given in table below. MARR = 4%. Alt A $15,000 $4,500 15% Initial cost Annual benefits ROR Life in years Reference Case Study 8 Alt B 27,000 7,600 13% 5 Alt C 24,000 6,500 11% Determine the AROR for the second increment (Alt. B- Alt.A) if A was retained during the first incremental analysis. OA.5.78% B. 10.85% O C.9.19% OD.8 12% 4
Incremental Analysis is required for mutually exclusive project analysis using which of these techniques?? a. Present Worth Analyses b. Benefit-Cost Analysis c. Annual Worth Analysis d. Discounted Payback Analysis e. None of the above
Given the data for three different alternatives in the table below, determine the best alternative using the incremental rate of return (∆RoR) analysis. MARR =9%. A B C First Cost $15,000 $25,000 $20,000 O &M Cost/ year 1,600 400 900 Benefit/year 8,000 13,000 9,000 Salvage value 3,000 6,000 4,600 Life in years 4 4 4 Group of answer choices Cannot determine Alterative A Alterative B Alterative C
Three independent alternatives are given below. If MARR is 18%, what is your decision? A B C Initial Cost $4.50 $1.90 $1.20 Annual Revenues $4.00 $2.50 $3.00 Salvage Value $0.50 $0.90 $0.00 Annual Operating & Maintenance Costs $1.20 $1.90 $2.70 Estimated life, in years 3 Infinite
Any help would be appreciated! Given the data for three different alternatives in the table below, determine the best alternative using the incremental rate of return (∆RoR) analysis. MARR =9%. A B C First cost $15,000 $25,000 $20,000 O &M Cost/ year 1,600 400 900 Benefit/year 8,000 13,000 9,000 Salvage value 3,000 6,000 4,600 Life in years 4 4 4 1. The better alternative between the first increment is ________________. A. Alt. A or Alt. B B. Alt. A C. Alt.C D. Alt. B 2. The better alternative between the second increment is ___________________. A. Alt. B or Alt. C B. Alt. B C. Alt. C D. Alt. A
A dam is proposed on a stretch of wild river, a river that is currently used for recreation. The dam will generate electricity. The dam will have a useful life of 50 years, after which its reservoir will be full of sediment and the dam will need to be removed. The following are characteristics of the dam: Initial Cost: $100,000,000 Electricity produced: 100,000 MWh per year, at $100/MWh. Cost of decommissioning dam: $10,000,000. Value of recreation lost: $5,000,000 per year. 1. If the social discount rate is 3% per year, is the dam a good idea? 2. If the social discount rate is 10% per year, is the dam a good idea? 3. Calculate the "cutoff" discount rate, c3 such that the dam is a good idea for discount rates c.