Five independent projects consisting of reinforcing dams, levees, and embankments are available for funding by a certain public agency. The following tabulation shows the equivalent annual benefits and costs for each: Project Annual Benefits Annual Costs A $1,800,000 $2,000,000 B $5,600,000 $4.200,000 C $8,400,000 $6,800,000 D $2,600,000 $2,800,000 E $6,600,000 $5,400,000 Assume that the projects are of the type for which the benefits can be determined with considerable certainty and that the agency is willing to invest money in any project as long as the B-C ratio is at least one. Which alternatives should be selected for funding. (Select all your answers from the choices given below.) a. Project Ab. Project Bc. Project Cd. Project De. Project Ef. Select none of the projects

Question

Muhammad Ortiz

Business

4 March, 03:20

Five independent projects consisting of reinforcing dams, levees, and embankments are available for funding by a certain public agency. The following tabulation shows the equivalent annual benefits and costs for each: Project Annual Benefits Annual Costs A $1,800,000 $2,000,000 B $5,600,000 $4.200,000 C $8,400,000 $6,800,000 D $2,600,000 $2,800,000 E $6,600,000 $5,400,000 Assume that the projects are of the type for which the benefits can be determined with considerable certainty and that the agency is willing to invest money in any project as long as the B-C ratio is at least one. Which alternatives should be selected for funding. (Select all your answers from the choices given below.) a. Project Ab. Project Bc. Project Cd. Project De. Project Ef. Select none of the projects

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Answers (1)

Know the Answer?

Patricia Wade · Answer 1

the correct answer is option (b).

Explanation:

Equivalent annual benefits and annual cost of each project is provided.

Calculate B-C ratio of project A -

Annual benefits = $1,800,000

Annual costs = $2,000,000

B-C ratio = Annual benefits/Annual costs = $1,800,000/$2,000,000 = 0.90

The B-C ratio of Project A is 0.90.

Calculate B-C ratio of project B -

Annual benefits = $5,600,000

Annual costs = $4,200,000

B-C ratio = Annual benefits/Annual costs = $5,600,000/$4,200,000 = 1.33

The B-C ratio of Project B is 1.33.

Calculate B-C ratio of project C -

Annual benefits = $8,400,000

Annual costs = $6,800,000

B-C ratio = Annual benefits/Annual costs = $8,400,000/$6,800,000 = 1.24

The B-C ratio of Project C is 1.24.

Calculate B-C ratio of project D -

Annual benefits = $2,600,000

Annual costs = $2,800,000

B-C ratio = Annual benefits/Annual costs = $2,600,000/$2,800,000 = 0.93

The B-C ratio of Project D is 0.93.

Calculate B-C ratio of project E -

Annual benefits = $6,600,000

Annual costs = $5,400,000

B-C ratio = Annual benefits/Annual costs = $6,600,000/$5,400,000 = 1.22

The B-C ratio of Project E is 1.22.

It has been stated that the agency is willing to invest money in any project as long as the B-C ratio is at least one.

The B-C ratio of project A and D are less than 1. So, they will not be considered.

Out of remaining three project, B-C ratio is highest in the case of Project B.

So, Project B will be selected.

Hence, the correct answer is option (b).