Answer:
Given information: Present net revenue:
Present net revenue can be obtained by using the following formula: …… (1)Where,
P = Present worth
A = Annual equivalent cash flow
i = Interest rate
N = Number of years
C = Annual revenue or annual cost
Benefit-cost ratio is can be obtained using the following formula: …… (2)Present worth of annual revenue for design A:
Equation (1) is used to obtain present worth of annual revenue of Design a.
Present worth of annual revenue of design A is
.
Present worth of annual cost for design A:
Equation (1) is used to obtain present worth of annual cost of Design a.
Present worth of annual cost of design A is
.
Present worth of annual revenue for design B:
Equation (1) is used to obtain present worth of annual revenue of Design b.
Present worth of annual revenue of design B is
.
Present worth of annual cost for design B:
Equation (1) is used to obtain present worth of annual cost of Design b.
Present worth of annual cost of design B is
.
Present worth of annual revenue for design C:
Equation (1) is used to obtain present worth of annual revenue of Design c.
Present worth of annual revenue of design C is
.
Present worth of annual cost for design C:
Equation (1) is used to obtain present worth of annual cost of Design c.
Present worth of annual cost of design C is
.
Benefit cost ratio for design A:
Substitute the respective values in Equation (2) to calculate benefit cost ratio of design a. Cost benefit ratio for design A is
.
Benefit cost ratio for design B:
Substitute the respective values in Equation (2) to calculate benefit cost ratio of design b. Cost benefit ratio for design B is
.
Benefit cost ratio for design C:
Substitute the respective values in Equation (2) to calculate benefit cost ratio of design c. Cost benefit ratio for design C is
. Since design B's cost benefit ratio is higher than other two designs, design B should be selected.
Answer:
Given information: Present equivalent worth of the annual cash flow can be obtained by using the following formula:
…… (1)Where,
P = Present equivalent worth
A = Annual cash flow
i = Interest rate
N = Number of years
Present equivalent worth of the future worth can be obtained by using the following formula: …… (2)Where,
F = Future worth
Present equivalent worth:
To obtain the cost benefit ratio, equalize the present equivalent revenue of the project with its present equivalent cost.
Equation (1) and (2) is used to convert the present worth of the project.
Benefit-cost ratio:
Benefit-cost ratio is calculated as follows: The benefit-cost ratio for the expansion of the project is
.
Hence, option (a) is chosen.
Answer:
Given information: Per mile expenses of a car is $0.25.
Annual worth of user benefit for long route :
Each year 400,000 cars travel in either route; hence, the annual cash flow of user benefit of long route travel can be calculated as follows: Thus, long route user benefit is $2,200,000.
Annual worth of user benefit for long route :
Each year 400,000 cars travel in either route; hence, the annual cash flow of user benefit of shortcut route travel can be calculated as follows: Thus, short route user benefit is $1,000,000.
Annual worth for the benefits, initial investment and the annual cost is calculated as follows for each of the two available alternative routes:
For Long Route ( j ): For Short Route ( k )
Compute the incremental benefit cost ratio using the following formula:
Therefore, the incremental benefit-cost ratio is
The incremental
ratio between long route and shortcut route is
. Since the incremental
ratio is less than 1, select the lower cost alternative which is the long route.
There is no answer for this question