Homework Answers
The benefits in year 0 is $50,350.
So, the present worth of benefits is $50,350.
The disbenefits in year 0 is $20,800
So, the present worth of dis-benefits is $20,800.
Annual cost = $5,000
Calculate the Present Worth of annual cost -
PWac = $5,000 (P/A, 10%, 8) = $5,000 * 5.3349 = $26,674.50
The present worth of annual cost is $26,674.50
Savings to be realized in year 8 = $8,000
Calculate the Present Worth of savings -
PWs = $8,000 (P/F, 10%, 8) = $8,000 * 0.4665 = $3,732
The present worth of savings is $3,732
Calculate the Conventional B/C ratio -
Conventional B/C ratio = [PWB - PWDB]/[PWAC - PWS]
Conventional B/C ratio = [$50,350 - $20,800]/[$26,674.50 - $3,732]
Conventional B/C ratio = 1.288
Thus,
The conventional B/C ratio is closest to 1.30.
Hence, the correct answer is the option (c).
Add Answer to:
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