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Two relatively inexpensive alternatives are available for reducing potential earthquake damage at a local government research facility. The cash flow estimates for each alternative are
Two relatively inexpensive alternatives are available for reducing potential earthquake damage at a local government research facility. The cash flow estimates for each alternative are given below. Use a 20 year study period, and assume the earthquake damage costs occur in the middle of the study period (i.e., in year 10). The earthquake damage cost without either of the alternatives is estimated at $6,000,000. At an interest rate of 8% per year, use the B/C ratio method to determine which one of the two alternatives should be selected. Alternative 1 Alternative 2 Initial cost, $ 600,000 1,100,000 Annual upkeep, $/year 50,000 70,000 Potential earthquake damage cost, $ 950,000 250,000 Two relatively inexpensive alternatives are available for reducing potential earthquake damage at a local government research facility. The cash flow estimates for each alternative are given below. Use a 20 year study period, and assume the earthquake damage costs occur in the middle of the study period (i.e., in year 10). The earthquake damage cost without either of the alternatives is estimated at $6,000,000. At an interest rate of 8% per year, use the B/C ratio method to determine which one of the two alternatives should be selected. Alternative 1 Alternative 2 Initial cost, $ 600,000 1,100,000 Annual upkeep, $/year 50,000 70,000 Potential earthquake damage cost, $ 950,000 250,000
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