ENG106W12_HW6-assignment

# ENG106W12_HW6-assignment - \$250,000 \$350,000 \$500,000...

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1 ENG 106 Homework #6 Solutions Winter 2012 12.2 A city government is considering increasing the capacity of the current wastewater treatment plant. The estimated financial data for the project are as follows: Description Data Capital investment \$1,200,000 Project life 25 years Incremental annual benefits \$250,000 Incremental annual costs \$100,000 Salvage value \$50,000 Discount rate 6% Calculate the benefit-cost ratio for this capacity expansion project. 12.7 The federal government is planning a hydroelectric project for a river basin. In addition to producing electric power, this project will provide flood control, irrigation and recreational benefits. The estimated benefits and costs expected to be derived from the three alternatives under consideration as listed as follows: Decision Alternatives A B C Initial cost \$8,000,000 \$10,000,000 \$15,000,000 Benefits Power sales \$1,000,000 \$1,200,000 \$1,800,000 Flood-control savings
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Unformatted text preview: \$250,000 \$350,000 \$500,000 Irrigation benefits \$350,000 \$450,000 \$600,000 Recreation benefits \$100,000 \$200,000 \$350,000 O&M costs \$200,000 \$250,000 \$350,000 The interest rate is 10%, and the life of each project is estimated to be 50 years. a) Find the benefit-cost ratio for each alternative. b) Select the best alternative, according to the incremental BC(i). 12.9 The government is considering undertaking one out of the four projects A1, A2, A3 and A4. These projects are mutually exclusive, and the estimated present worths of their costs and of their benefits are shown in millions of dollars as follows: Projects PW benefits PW costs A1 \$40 \$85 A2 \$150 \$110 A3 \$70 \$25 A4 \$120 \$73 All of the projects have the same duration. Assuming that there is no do-nothing alternative, which alternative would you select? Justify your choice by using a benefit-cost ratio on the incremental investment, BC(i)....
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