In a benefit-cost analysis, the determination of feasibility
A) can be made by finding out if PVB/PVC is greater than unity
B) is not critical and therefore is an optional step
C) can be accomplished by finding out if PVNB is greater than zero
D) all of the above
E) (a) and (c) only

Question

Quizplus · Accepted Answer

Feasibility in benefit-cost analysis is determined by finding out if the present value of net benefits (PVNB) is greater than zero. This is because if PVNB is positive, it means that the project is expected to generate a greater benefit than the cost incurred to implement it. Additionally, the feasibility condition can also be assessed by checking if the ratio of present value of benefits to present value of costs (PVB/PVC) is greater than unity, which indicates that benefits exceed costs. Therefore, both (a) and (c) are correct, which makes option E the best choice. Option B is incorrect as feasibility is a critical step in benefit-cost analysis and not optional.

In a Benefit-Cost Analysis, the Determination of Feasibility