A road resurfacing project costs $250,000, lasts 5 years and saves $150,000 annually in patching costs....
A road resurfacing project costs $250,000, lasts 5 years and saves $150,000 annually in patching costs. MARR is 12%. Use BCR method (2 decimal places).
Homework Answers
Initial Cost = $250,000
Life = 5 years
Annual Savings = $150,000
MARR = 12%
Calculate the Benefit Cost Ratio
Using Present Worth Method
B/C Ratio = PW of Benefits ÷ PW of Cost
B/C Ratio = $150,000 (P/A, 12%, 5) ÷ $250,000
B/C Ratio = $150,000 (3.60478) ÷ $250,000
B/C Ratio = $540,717 ÷ $250,000
B/C Ratio = 2.16
The benefit cost ratio is 2.16. B.C Ratio is greater than 1, so select the project.
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