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e355t2

# e355t2 - E 355 Test 2 Solution Spring 2008 2.1 Excel...

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E 355- Test 2 Solution Spring 2008 2.1 Benefits \$/yr B 750 720 Dis-Benefits \$/yr D 150 220 Initial cost \$ I 2500 2000 O & M costs \$/yr C 350 450 User fees \$/yr R 150 250 MARR = 18%, N=15 years. a) Calculate the conventional BCR for each alternative. [9 point] Alternative A In order to calculate the BCR, we intially have to annualize the initial cost, I. So, for Alternative A, I ( A/P , i, N) = 2500 ( A/P,18%,15) = 2500 (0.1964) = 491.00 So, Alternative A Conventional B/C Analysis: B = ( B - D ) C I+(C-R) B C = 0.87 Alternative B I ( A/P , i, N) = ( A/P,18%,15) = 2000*(0.1964) = 392.80 So, Conventional B/C Analysis: B = ( B - D ) I Annulalize = Note: Be careful for units while you are doing calculation. Pay attention to the definition of BCR and the formula used. 750-150 491 + (350 - 150) Units Alternative A Alternative B Excel consulting is installing a new system for employees. Mr. Bhatt the CEO of the company considering two alternatives. The following tables summarize the economics of each. I Annulalized= E355-Spring08-Test2-Sol 1 of 3 3/23/2008 C I+(C-R) B C = 0.84 b) Calculate the modified BCR for each alternative. [9 point] Alternative A Modified B/C Analysis: B C B C = 0.81

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• Fall '08
• Merino/Abel
• Alternative rock, B/C analysis, Mr. Bhatt, Dr. Gandhi