Black Creek flows through a suburban area near a medium-sized city into a large river. During recent years, annual floods have damaged homes in its vicinity at an increasing rate. Average annual flood damages have been estimated to be $300,000 at present and are expected to increase by $20,000 each year. A proposal has been made to do some channel improvement (CI) and build a storage dam and small reservoir (D & R) to contain excessive runoff. Initial cost of CI is $400,000 and annual maintenance is expected to be $30,000. The D & R will be built only if the CI is made. Initial cost of D & R is $1,600,000; annual operation and maintenance is estimated to be $45,000. If the CI is made, average annual flood damages are expected to be $180,000 at present and to increase by $12,000 each year. Certain losses to the ecology are believed to be offset by increased recreational benefits due to improved navigability. If the D & R is built, average annual flood damages are expected to be reduced to $30,000 at present and to increase by $5,000 each year. The D & R will remove certain land from agriculture and possible future development. This disbenefit, valued at $20,000 per year, is partially offset by improved recreational fishing valued at $8,000 per year. Using an i* of 8%, find the appropriate B/C ratios for CI and D & R. Consider all consequences to the government as costs and all consequences to the general public as benefits (or disbenefits). Use a 30-year study period and assume no residual value at the end of that time. Black Creek flows through a suburban area near a medium-sized city into a large river. During recent years, annual floods have damaged homes in its vicinity at an increasing rate. Average annual flood damages have been estimated to be $300,000 at present and are expected to increase by $20,000 each year. A proposal has been made to do some channel improvement (CI) and build a storage dam and small reservoir (D & R) to contain excessive runoff. Initial cost of CI is $400,000 and annual maintenance is expected to be $30,000. The D & R will be built only if the CI is made. Initial cost of D & R is $1,600,000; annual operation and maintenance is estimated to be $45,000. If the CI is made, average annual flood damages are expected to be $180,000 at present and to increase by $12,000 each year. Certain losses to the ecology are believed to be offset by increased recreational benefits due to improved navigability. If the D & R is built, average annual flood damages are expected to be reduced to $30,000 at present and to increase by $5,000 each year. The D & R will remove certain land from agriculture and possible future development. This disbenefit, valued at $20,000 per year, is partially offset by improved recreational fishing valued at $8,000 per year. Using an i* of 8%, find the appropriate B/C ratios for CI and D & R. Consider all consequences to the government as costs and all consequences to the general public as benefits (or disbenefits). Use a 30-year study period and assume no residual value at the end of that time
