Could you please explain with details because I want to learn by following your
ID: 1143742 • Letter: C
Question
Could you please explain with details because I want to learn by following your solution steps.
2) The plan for one of the Princes' Islands in Istanbul is to ban vehicular traffic on the main street and turning this street into a pedestrian mall with tree plantings and other beautification features. This plan will involve actual costs of 5,9 million TL and, according to its proponents, the plan will produce benefits and disbenefits to the town as follows Benefits » Increased sales tax revenue per year Increased re ° Benefits due to decreased air pollution per year : » Quality of life improvements to users per year : : 570,000 TL :310,000 TL 60,000 TL 90,000 TL al estate property taxes per year Disbenefits ° Increased maintenance per year 165,000 TL Compute the conventional B-C ratio of this plan based on a MARR of 10% per year and a 23-year project life. Use AW as the equivalent worth method Benefits (AW) Disbenefits (AW) Costs (AW) (9 points) (9 points) 10 points) Conventional B-C ratio Benefits reduced: by amount of disbenefits (10 points)Accept?: (5 points) Costs increased by: amount of disbenefits (10 points)Accept?: (5 points)Explanation / Answer
Answer-
Benefits (AW) = increased sales tax revenue/ year + increased property tax/ year + benefits of decrease in pollution/ year + benefit of quality of life per year
Benefits (AW) = 570000 + 310000 + 60000 + 90000 = 1030000 TL
Disbenefits (AW) = increased maintenance per year = 165000 TL
Let, UAC = AWc
Then,
5900000 = AWc*(1-1/1.1^23)/.1 = AWc*8.8832
AWc = 5900000/8.8832
AWc = 664175.07 TL
So,
Cost (AW) = 664175.07 TL
Benefits reduced by amount of disbenefits = 1030000 – 165000 = 865000 TL (accepted)
Cost increased by amount of disbenefits =664175.07+ 165000 = 829175.07 TL
Conventional B-C ratio = Benefits (AW) / (Cost (AW) + Disbenefits (AW))
Conventional B-C ratio = 1030000/(664175.07 + 165000)
Conventional B-C ratio = 1.24
Since the conventional B-C ratio is more than 1, so project should be accepted.