# Indicate whether the following characteristics are primarily associated with public sector or private sector projects.(a) Profits (b) Taxes (c) Disbenefits (d) Infinite life.

Indicate whether the following characteristics are primarily associated with public sector or private sector projects.

(a) Profits

(b) Taxes

(c) Disbenefits

(d) Infinite life

Question 1 options:
 a) (a) Private (b) Public (c) Public (d) Private
 b) (a) Private (b) Private (c) Public (d) Private
 c) (a) Private (b) Private (c) Public (d) Public
 d) (a) Private (b) Public (c) Private (d) Public

#### Question 2(5 points)

The estimated annual cash flows for a proposed city government project are costs of \$450,000 per year, benefits of \$600,000 per year, and disbenefits of \$100,000 per year. Determine the B/C ratio.

Question 2 options:
 a) B/C = 1.11
 b) B/C = 0.96
 c) B/C = 1.01
 d) B/C = 1.15

#### Question 3(5 points)

The estimated annual cash flows for a proposed city government project are costs of \$450,000 per year, benefits of \$600,000 per year, and disbenefits of \$100,000 per year. Determine the value of B – C.

Question 3 options:
 a) B-C = \$75,000
 b) B-C = \$43,000
 c) B-C = \$50,000
 d) B-C = \$65,000

#### Question 4(5 points)

The modified B/C ratio for a city-owned hospital heliport project is 1.7. If the initial cost is \$1 million and the annual benefits are \$150,000, what is the amount of the annual M&O costs used in the calculation, if a discount rate of 6% per year applies? The estimated life is 30 years.

Question 4 options:
 a) M&O costs = \$27,495 per year
 b) M&O costs = \$26,495 per year
 c) M&O costs = \$24,495 per year
 d) M&O costs = \$25,495 per year

#### Question 5(5 points)

Solar and conventional alternatives are available for providing energy at a remote space research site. The costs associated with each alternative are shown below. Use the B/C method to determine which system should be selected at a discount rate of 0.75% per month over a 6-year study period.

### Conventional

Solar
Initial cost, \$ 2,000,000 4,500,000
M&O cost, \$/month 50,000 10,000
Salvage value, \$ 0 150,000

Question 5 options:
 a) Select both systems
 b) Select the conventional system
 c) Select the solar system
 d) Select Do Nothing

#### Question 6(5 points)

Three alternatives identified as X, Y, and Z were evaluated by the B/C method. The analyst, Joyce, calculated project B/C values of 0.92, 1.34, and 1.29. The alternatives are listed in order of increasing total equivalent costs. She isn’t sure whether an incremental analysis is needed.

If these are independent projects, which alternatives must be compared incrementally?

Question 6 options:
 a) Accept Y and Z
 b) Accept X and Z
 c) Accept Y only
 d) Accept X and Y

#### Question 7(5 points)

The four mutually exclusive alternatives below are being compared using the B/C method. What alternative, if any, should be selected?

Incremental B/C
Initial   When Compared
Investment,   with Alternative

### M

J 20 1.10
K 25 0.96 0.40
L 33 1.22 1.42 2.14
M 45 0.89 0.72 0.80 0.08

Question 7 options:
 a) Select alternative M
 b) Select alternative L
 c) Select alternative K
 d) Select alternative J

#### Question 8(5 points)

When a B/C analysis is conducted,

Question 8 options:
 a) The benefits and costs must be expressed in terms of their future worths
 b) The benefits and costs must be expressed in terms of their present worths
 c) The benefits and costs must be expressed in terms of their annual worths
 d) The benefits and costs can be expressed in terms of PW, AW or FW

#### Question 9(5 points)

In a conventional B/C ratio,

Question 9 options:
 a) Disbenefits and M&O costs are added to costs.
 b) Disbenefits are subtracted from benefits, and M&O costs are added to costs.
 c) Disbenefits and M&O costs are subtracted from benefits
 d) Disbenefits are added to costs, and M&O costs are subtracted from benefits

#### Question 10(5 points)

In a modified B/C ratio analysis,

Question 10 options:
 a) Disbenefits and M&O costs are added to costs.
 b) Disbenefits are subtracted from benefits, and M&O costs are added to costs.
 c) Disbenefits and M&O costs are subtracted from benefits.
 d) Disbenefits are added to costs, and M&O costs are subtracted from benefits.

#### Question 11(5 points)

In evaluating three mutually exclusive alternatives by the B/C method, the alternatives were ranked in terms of increasing total equivalent cost (A, B, and C, respectively), and the following results were obtained for the project B/C ratios: 1.1, 0.9, and 1.3. On the basis of these results, you should

Question 11 options:
 a) Compare A and C incrementally
 b) Select A
 c) Select A and C
 d) Select C

#### Question 12(5 points)

Identify a basic assumption made specifically about the challenger alternative when a replacement study is performed.

Question 12 options:
 a) Challenger is the worst alternative to defender now and it will be the worst for all succeeding life cycles

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