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8. The Federal Govt. is planning a hydraulic project for a river basin. In addition to producing electric power, this project will provide flood control,
8. The Federal Govt. is planning a hydraulic 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 two alternatives are as follows: Alternative B Alternative A $10,000,00015,000,000 Initial Cost Annual Flood Control Savings Annual Irigation Benefits Annual Recreation Benefits Annual Additional benefits Annual O & M Costs $350,000 $450,000 $200,000 $1,200,000 $ 250,000 $500,000 $600,000 $ 350,000 $1,800,000 350,000 The interest rate is 10% and the lives of the projects are estimated to be 50 years. a. Calculate the benefit-cost ratio (BCR) for each alternative. [2 + 2 points] b. Select the best alternative on the basis of BCR [3 points]
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