Question

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1) There are two potential locations to construct an urgent care walk-in clinic to serve rural residents. Use B/C analysis to determine which location, if any, is better at an interest rate of 8% per year.

Location	1	2
Initial Cost, $	1,200,000	2,000,000
Annual M&O Cost, $/Year	80,000	75,000
Annual Benefits, $/Year	520,000	580,000
Annual Disbenefits, $/Year	90,000	140,000
Site Suitability, Years	10	20

2) Various techniques have been proposed to curb cross-border drug smuggling into a country. The costs of implementing each strategy along a particularly rugged section of the border are indicated below. The table also includes a score that is compiled based on deterrence, interdiction, and apprehension, with a higher score indicating better performance. Determine the technique with the highest and the lowest cost-effectiveness ratio. For a budget of $60 million, determine the total cost of the most cost-effective techniques.

Activity	Cost, $	Score
Tethered Aerostats	3.7	8
Boots-on-the-Ground	34.1	52
Fence	12.2	12
Motion Sensors	7.2	7
Seismic Sensors	4.8	5
Drones	11.2	26

Answer 1

B/C ratio = (PV of benefits - PV of disbenefits) / PV of costs

			Present Value
Location	1	2	1	2	Formula
Initial Cost, $	1,200,000	2,000,000	1,200,000	2,000,000
Annual M&O Cost, $/Year	80,000	75,000	536,806.51	736,361.06	PV(0.08,10, annualcost)
Annual Benefits, $/Year	520,000	580,000	3,489,242.33	5,694,525.50	PV(0.08,10, annualbenefit)
Annual Disbenefits, $/Year	90,000	140,000	603,907.33	1,374,540.64	PV(0.08,10, annualdisbenefit)
Site Suitability, Years	10	20
		B/C	5.38	5.87

B/C for 2 is greater than 1, therefore it is better

Activity	Cost, $	Score	Cost effectiveness
			Score/Cost
Tethered Aerostats	3.7	8	2.16
Boots-on-the-Ground	34.1	52	1.52
Fence	12.2	12	0.98
Motion Sensors	7.2	7	0.97
Seismic Sensors	4.8	5	1.04
Drones	11.2	26	2.32

Most cost effective is drones and least is motion sensors