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The government is considering building apartments for public employees working in remote areas. A comparison of two possible apartment buildings is given in the table
The government is considering building apartments for public employees working in remote areas. A comparison of two possible apartment buildings is given in the table below: Building A Building B Building C Initial investment by the $7,800,000 $9,700,000 $8,200,000 government Estimated annual $180,000 $120,000 $190,000 O&M costs Savings in annual transportation costs currently $1,240,000 $1,450,000 $1,000,500Savings in annual transportation costs currently $1,240,000 $1,450,000 $1,000,500 paid by employees The salvage values of the apartments are assumed to be 60% of the initial investment. Compute the benefit-cost ratio using a 10% interest rate and a 20year study period. Assume there is no do-nothing alternative. a. Find the benefit-cost ratio for each alternative. b. Select the best alternative based on the incremental benefitcost ratio between alternatives
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