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ENG106W12_HW6-solution

# ENG106W12_HW6-solution - ENG 106 Homework#6 Solutions...

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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. Costs C = \$1,200,000 + \$100,000 (P/A, 6%, 25) = \$2,478,340 Benefits B = \$250,000 (P/A, 6%, 25) + \$50,000 (P/A, 6%, 25) = \$3,207,500 Benefit-Cost ܤܥሺ6%ሻ ൌ ଷ,ଶ଴଻,ହ଴଴ ଶ,ସ଻଼,ଷସ଴ ൌ 1.29 ൐ 1 ok 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 \$250,000 \$350,000 \$500,000

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