Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A nonprofit government corporation is considering two alternatives for generating power. The useful life of both alternatives is 35 years. Using an interest rate
A nonprofit government corporation is considering two alternatives for generating power. The useful life of both alternatives is 35 years. Using an interest rate of 5%, determine which alternative (if either) should be selected according to the conventional B-C-ratio method. Click the icon to view the additional information about the alternatives. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 5% per year. More Info Perform the conventional B-C Analysis. Fill-in the table below. (Round to two decimal places.) Alternative A B-C ratio Is the alternative ac 1.15 Yes B 1.23 Yes The incremental B-C ratio is 1.37, thus the alternative B should be selected. (Round to two decimal places.) Alternative A. Build a coal-powered generating facility at a cost of $17,000,000. Annual power sales are expected to be $1,000,000 per year. Annual operating and maintenance costs are $220,000 per year. A benefit of this alternative is that it is expected to attract new industry, worth $450,000 per year, to the region. Alternative B. Build a hydroelectric generating facility. The capital investment, power sales, and operating costs are $27,000,000, $900,000, and $120,000 per year, respectively. Annual benefits of this alternative are as follows: Flood-control savings Irrigation $650,000 $250,000 Recreation $50,000 Ability to attract new industry $300,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started