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find value of the incremental benefit-cost ratio You're a consultant helping a local governmental body consider two alternatives for generating power: Alternative A. Build a
find value of the incremental benefit-cost ratio
You're a consultant helping a local governmental body consider two alternatives for generating power: Alternative A. Build a coal-powered generating facility at a cost of $21,000,000. Annual power sales are expected to be S1,200,000 per year. Annual operating and maintenance costs are S225,000 per year. A benefit of this alternative is that it is expected to attract new industry, worth S550,000 per year, to the region Alternative B. Build a hydroelectric generating facility. The capital investment is $30,000,000, and power sales and operating costs are S850,000 and $90,000 per year, respectively. Additional annual benefits of this alternative are as follows Flood control savings: $700,000 Irrigation: $250,000 Recreation: $100,000 Ability to attract new industry: $425,000 The useful life of both alternatives is 50 years, and neither has a salvage value at the end of life. Using a MARR of 5% per year, what is the value of the incremental benefit-cost ratio associated with pursuing the hydroelectric power project rather than the coal-powered facility? Note that, in your calculations, you should find that both alternatives are acceptable, that is why incremental analysis is needed here. (Report your answer to the nearest thousandth, e.g., 0.123.) You're a consultant helping a local governmental body consider two alternatives for generating power: Alternative A. Build a coal-powered generating facility at a cost of $21,000,000. Annual power sales are expected to be S1,200,000 per year. Annual operating and maintenance costs are S225,000 per year. A benefit of this alternative is that it is expected to attract new industry, worth S550,000 per year, to the region Alternative B. Build a hydroelectric generating facility. The capital investment is $30,000,000, and power sales and operating costs are S850,000 and $90,000 per year, respectively. Additional annual benefits of this alternative are as follows Flood control savings: $700,000 Irrigation: $250,000 Recreation: $100,000 Ability to attract new industry: $425,000 The useful life of both alternatives is 50 years, and neither has a salvage value at the end of life. Using a MARR of 5% per year, what is the value of the incremental benefit-cost ratio associated with pursuing the hydroelectric power project rather than the coal-powered facility? Note that, in your calculations, you should find that both alternatives are acceptable, that is why incremental analysis is needed here. (Report your answer to the nearest thousandth, e.g., 0.123.)Step by Step Solution
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