The B/C ratio for a flood control project along the Swanee River was calculated to be...
The B/C ratio for a flood control project along the Swanee River was calculated to be 1.5. If the benefits were $450,000 per year and the maintenance costs were $221,000 per year, determine the initial cost of the project at an interest rate of 7% per year and a 50-year life.
The initial cost of the project is
Homework Answers
Let the initial cost be X
B/C ratio = PW of benefits/PW of costs
PW of benefits= 450000(P/A,7%,50) = 450000(13.80075) = 6210336
PW of disbenefits = X+221000(P/A,7%,50) = X+3049965
So,
1.5 = 6210336/X+3049965
1.5X+4574947.5 = 6210336
X= 1635388.5/1.5
X= 1090259
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