Question

5) (24 points) A city goverment is considering three alternatives to improve recreational facilities in the city. The improvements are expected to bring in additional income over a 10-year period as shown below. Alternative A Alternative B Alternative C Initial Cost $450,000 $337,500 $375,000 Annual Income $85,000 $60,000 $65,000 MARR is 10% per year compounded annually. For political reasons, one alterative must be chosen. Which one would you recommend? Solve using the benefit-cost ratio analysis.

NO EXCEL. Show B/C and include a Do Nothing option comparison. We should see 3 comparisons

Answer 1

Soluhurs Beutils Cost rahi = PV of cash inflow Initial inuestrent 6.1446 can Greaper than I u better. of PU @ lot Praf (10l., ) = A B 4 PV of Annual incom. & 522240 $368676 450 on 3375W Alternativ C $ 399 399 $ 375mm Initial Cost $ $ Bennl cost raho - loo92 1.065 1.1605 $ 72240 $ 31176 6 Nipv @6 $24.399 Alternative a recommenel, which highest the B/c rapo Higher the MPV anel