In: Accounting
For data shown, what is the benefit/cost ratio?
BENEFITS | Increase p. y. | ||
Additional business activity | $4,000,000 | per year | 4% |
Estimated future economic activity | $850,000 | per year | 5% |
Reduction in accidents | $200,000 | per year | 6% |
DIS-BENEFITS | |||
Destruction of vegetable gardens | $340,000 | per year | 11% |
Reduction in business on present road | $185,000 | per year | 8% |
COSTS | |||
Initial cost | $46,000,000 | over 15 years | |
Maintenance cost | $410,000 | per year | 10% |
Interest rate | RATE | 7% | p. y. c. y. |
Life of project | NPER | 15 | years |
Group of answer choices
1.31
1.06
0.95
0.89
Particulars | Amount | Increase Per Year |
Cost Of Investment | 46000000 | 0% |
Benefits | ||
Additional Business Activity | 4000000 | 4% |
Estimated Future Economic Activity | 850000 | 5% |
Reduction in Accidents | 200000 | 6% |
Costs | ||
Destruction of the vegetable garden | 340000 | 11% |
Reduction in business on the present road | 185000 | 8% |
Maintenance Costs | 410000 | 10% |
Interest Rate | 7% | |
Life of Project | 15 years |
Year | Cost of investment | Additional Business Activity | Estimated Future Economic Activity | Reduction in Accidents | Destruction of vegetable garden | Reduction in business on present road | Maintenance Costs | Net Cash Flow |
0 | $ (46,000,000.00) | $ - | $ - | $ - | $ - | $ - | $ - | $ (46,000,000.00) |
1 | $ - | $ 4,000,000.00 | $ 850,000.00 | $ 200,000.00 | $ 340,000.00 | $ 185,000.00 | $ 410,000.00 | $ 4,115,000.00 |
2 | $ - | $ 4,160,000.00 | $ 892,500.00 | $ 212,000.00 | $ 377,400.00 | $ 199,800.00 | $ 451,000.00 | $ 4,236,300.00 |
3 | $ - | $ 4,326,400.00 | $ 937,125.00 | $ 224,720.00 | $ 418,914.00 | $ 215,784.00 | $ 496,100.00 | $ 4,357,447.00 |
4 | $ - | $ 4,499,456.00 | $ 983,981.25 | $ 238,203.20 | $ 464,994.54 | $ 233,046.72 | $ 545,710.00 | $ 4,477,889.19 |
5 | $ - | $ 4,679,434.24 | $ 1,033,180.31 | $ 252,495.39 | $ 516,143.94 | $ 251,690.46 | $ 600,281.00 | $ 4,596,994.55 |
6 | $ - | $ 4,866,611.61 | $ 1,084,839.33 | $ 267,645.12 | $ 572,919.77 | $ 271,825.69 | $ 660,309.10 | $ 4,714,041.49 |
7 | $ - | $ 5,061,276.07 | $ 1,139,081.29 | $ 283,703.82 | $ 635,940.95 | $ 293,571.75 | $ 726,340.01 | $ 4,828,208.48 |
8 | $ - | $ 5,263,727.12 | $ 1,196,035.36 | $ 300,726.05 | $ 705,894.45 | $ 317,057.49 | $ 798,974.01 | $ 4,938,562.58 |
9 | $ - | $ 5,474,276.20 | $ 1,255,837.13 | $ 318,769.61 | $ 783,542.84 | $ 342,422.09 | $ 878,871.41 | $ 5,044,046.60 |
10 | $ - | $ 5,693,247.25 | $ 1,318,628.98 | $ 337,895.79 | $ 869,732.55 | $ 369,815.86 | $ 966,758.55 | $ 5,143,465.06 |
11 | $ - | $ 5,920,977.14 | $ 1,384,560.43 | $ 358,169.54 | $ 965,403.14 | $ 399,401.12 | $ 1,063,434.41 | $ 5,235,468.44 |
12 | $ - | $ 6,157,816.23 | $ 1,453,788.45 | $ 379,659.71 | $ 1,071,597.48 | $ 431,353.21 | $ 1,169,777.85 | $ 5,318,535.85 |
13 | $ - | $ 6,404,128.87 | $ 1,526,477.88 | $ 402,439.29 | $ 1,189,473.20 | $ 465,861.47 | $ 1,286,755.63 | $ 5,390,955.74 |
14 | $ - | $ 6,660,294.03 | $ 1,602,801.77 | $ 426,585.65 | $ 1,320,315.26 | $ 503,130.39 | $ 1,415,431.20 | $ 5,450,804.61 |
15 | $ - | $ 6,926,705.79 | $ 1,682,941.86 | $ 452,180.79 | $ 1,465,549.93 | $ 543,380.82 | $ 1,556,974.32 | $ 5,495,923.37 |
NPV = ($2,458,908.76)
Benefit-Cost Ratio = (NPV+Initial Investment)/Initial Investment
=(-2,458,908.76+46,000,000)/46,000,000
=0.95