Question
The state of Indiana has decided to implement a new food control system, and is choosing between two competing proposals. Each alternative is expected to
The state of Indiana has decided to implement a new food control system, and is choosing between two competing proposals. Each alternative is expected to provide a functioning flood control system for the next 50 years. Proposal A would result in estimated annual benefits to the public of $400,000 due to increased safety, an initial cost of $2,500,000, an annual maintenance cost of $150,000, and annual disbenefits to the public of $100,000. Proposal 8 would result in estimated annual benefits to the public of $350,000, an initial cost of $2,000,000, an annual maintenance cost of $130,000, and annual disbenefits to the public of $50,000 Use the annual worth method to compute the conventional B-C ratio for each proposal, while including disbenefits in the numerator Determine which proposal should be chosen and explain why. Assume 8% MARR, and no additional cash flows at the end of the 50 year project period.
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