Homework Answers
Solution:-
The formula for B/C ration is as follows:
B/C = (PW of B – PW of D)/(PW of C – PW of S)
Where,
B is benefits
D is disbenefits
C is cost
S is salvage value
Conventional Vs Solar alternative:
Calculate the incremental B/C ratio as follows:
ΔB/C = (575,000 – 11,000)/2,700,000 (A/P, 8%,5) -230,000 (A/P, 8%,5)
= (564,000)/2,700,000(.2505) – 230,000(.2505)
=564,000 / 676,350 – 57,615
=564,000/618,735
=.91
The B/C ratio is .91
As, the B/C ratio is less than the 1, so, select the smaller cost alternative i.e. Conventional method which is the final selection
Solution:-
The formula for B/C ration is as follows:
B/C = (PW of B – PW of D)/(PW of C – PW of S)
Where,
B is benefits
D is disbenefits
C is cost
S is salvage value
Conventional Vs Solar alternative:
Calculate the incremental B/C ratio as follows:
ΔB/C = (575,000 – 11,000)/2,700,000 (A/P, 8%,5) -230,000 (A/P, 8%,5)
= (564,000)/2,700,000(.2505) – 230,000(.2505)
=564,000 / 676,350 – 57,615
=564,000/618,735
=.91
The B/C ratio is .91
As, the B/C ratio is less than the 1, so, select the smaller cost alternative i.e. Conventional method which is the final selection
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