The City of Waterloo is considering the adoption of improvements to Waterloo Park and is presented...

The City of Waterloo is considering the adoption of improvements to Waterloo Park and is presented with three mutually-exclusive options. Option A adds a splash pad which is estimated to offer benefits of $20 million and costs $16 million to build. Option B adds basketball courts has estimated benefits of $26 million and costs of $20 million. Option C is a nature exploration area that is estimated to offer benefits of $10 million and has costs of $2 million. In additional, a fourth option D is an improved path and signage project that has estimated costs of $8 million and standalone benefits of $4 million, but it can be combined with any of the first three, changing their respective benefits as follows: if built with A, it augments its benefits by $16 million, if built with B it increase the benefits of project B by $10 million, but if built with C it reduces the benefits of project C by $2 million.

i. Generate a table with 2 columns: the benefit-cost ratio and net benefits for each possible option.

ii. Which option should be chosen according to the Cost Benefit decision rule?

Solutions

Expert Solution

Option C with D will have negative ratio it means that bear loss. Ratio is 3:4 in negative.

According to above working notes combination of Option A with D will have greater benefit cost ratio that is 1:2

Hence option A with D is preferred.

Kindly rate for my answer please ? and feel free to ask your doubts.

Rahul Sunny answered 1 year ago

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