A project has a first cost of $113,164, will produce a $65,390 net annual benefit
A project has a first cost of $113,164, will produce a $65,390 net annual benefit, and has annual maintenance costs of $25,793 over its 25-year life. It has a salvage value of $36,264 at the end of its life. Using a MARR of 2%, what is the benefit-cost ratio of the project?
Enter your answer as: 1.23
(Calculate to 2 decimal places only.)
Homework Answers
Solution:-
First Cost = $113,164
Net Annual Benefit = $65,390
Annual maintainance cost = $25,793
N = 25 years
Salvage value = 36,264
I = 2%
PW benefits = $65,390(P/A, 2%, 25) + 36,264(P/F, 2%, 25)
= $65,390(19.523) + 36,264(0.6095)
= $12,76,608.97 + 22,102.908
= $12,98,711.878
PW cost = $113,164 + $25,793(P/A, 2%, 25)
= $113,164 + $25,793(19.523)
= $113,164 + 5,03,556.739
= $6,16,720.739
Benefit Cost Ratio = $12,98,711.878 / $6,16,720.739
= 2.11
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