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Three public investment proposals with the same service life are under consideration: P1, P2, and P3. Their respective total benefits, initial investment, and recurring costs

  1. Three public investment proposals with the same service life are under consideration: P1, P2, and P3. Their respective total benefits, initial investment, and recurring costs are given as present worth:

Present Worth

Proposal P1

Proposal P2

Proposal P3

B

$40,000

$70,000

$50,000

I

$10,000

$30,000

$20,000

C

$10,000

$20,000

$15,000

  1. Do all proposals have an acceptable B/C ratio?
  2. If there is no do-nothing alternative, which proposal would you select based on incremental investment?

Dissection: identify input & output variables and include cash flow table

Solution : identify method

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