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From the beneath table find best B/C ratio. Assume the program period for each is six...

From the beneath table find best B/C ratio.

Assume the program period for each is six year and interest rate is 6%.

Program

Initial cost year 0

Annual cost year 2 through 6

Estimated benefits year 2 through 6

1

700,000

350,000

542,433

2

2,200,000

500,000

1.084,867

3

1,200,000

140,000

433,947

Solutions

Expert Solution

Program

1

2

3

Year

Cost

benefit

Discounted Cost

Discounted benefit

Cost

benefit

Discounted Cost

Discounted benefit

Cost

benefit

Discounted Cost

Discounted benefit

1

7,00,000

660377.36

0.00

22,00,000

2075471.70

0.00

12,00,000

1132075.47

0.00

2

3,50,000

5,42,433

311498.75

482763.44

5,00,000

10,84,867

444998.22

965527.77

1,40,000

4,33,947

124599.50

386211.29

3

3,50,000

5,42,433

293866.75

455437.21

5,00,000

10,84,867

419809.64

910875.25

1,40,000

4,33,947

117546.70

364350.27

4

3,50,000

5,42,433

277232.78

429657.74

5,00,000

10,84,867

396046.83

859316.28

1,40,000

4,33,947

110893.11

343726.67

5

3,50,000

5,42,433

261540.36

405337.49

5,00,000

10,84,867

373629.09

810675.73

1,40,000

4,33,947

104616.14

324270.44

6

3,50,000

5,42,433

246736.19

382393.86

5,00,000

10,84,867

352480.27

764788.43

1,40,000

4,33,947

98694.48

305915.51

Total

2051252.19

2155589.74

4062435.75

4311183.46

1688425.41

1724474.18

B/C ratio

1.05

1.06

1.02

So, program 2 has the highest B:C ratio

Rahul Sunny answered 2 years ago
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