E 355 Test 2 Solution
Spring 2008
2.1
Benefits
$/yr
B
750
720
DisBenefits
$/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+(CR)
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.
750150
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=
E355Spring08Test2Sol
1 of 3
3/23/2008
C
I+(CR)
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
