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 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 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 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 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 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 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 | |||||
Alternative |
$ Millions |
B/C Ratio |
J |
K |
L |
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 8 (5 points)
When a B/C analysis is conducted,
Question 9 (5 points)
In a conventional B/C ratio,
Question 10 (5 points)
In a modified B/C ratio analysis,
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 12 (5 points)
Identify a basic assumption made specifically about the challenger alternative when a replacement study is performed.