Consider the two new designs for a new patient room for a public hospital. Only three costs/benefits listed in the table below are to be considered. Patient usage cost is an estimate of the amount paid by patients over the insurance coverage generally allowed for a hospital room. The discount rate is 5% and the life of the building is estimated at 30 years. Assume repeatability and show all work. (10 marks in total) (a) Use the conventional B/C analysis to select A or B. (6 marks) (b) If it was further identified that design A will reduce $500,000 per year in revenue for an adjacent private hospital and design B will reduce $400,000. Redo B/C analysis to determine which one is now the preferred option. (4 marks)

Construction cost $ Maintenance cost S/yr Patient usage cost S/yr Design A 10,000,000 35,000 450,000 Design B 15,000,000 55,000 200,000