In the development of a publicly owned, commercial waterfront area, three possib
ID: 1152951 • Letter: I
Question
In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are given in the table to the right. a. Which plan(s) should be adopted, if any, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required investment is at least 1.0? b. Suppose that 15% of the costs of each plan are reclassified as disbenefits. What percentage change in the B-C ratio of each plan results from the reclassification? c. Comment on why the rank-orderings in (a) are unaffected by the change in (b) PW (S000s) Plan Costs Benefits $121,000 118,000 155,000 143,000 138,000 108,000 a. Perform the B-C analysis. Fill-in the table below. (Round to four decimal places.) B-C ratio 0.9752 1.1232 1.3241 Is the alternative acceptable? 0 Yes Yes b. Suppose that 15% of the costs of each plan are reclassified as disbenefits. Calculate the new costs. B-C ratio and percentage change in the B-C ratio of each plan Type the absolute values. (Round the cost to the nearest dollar. Round the B-C ratio to four decimal places. Round the B-C ratio percentage change to one decimal place.) Plan Percentage change, % 0.0 PW of Costs PW of Benefits Inc. B-C ratio 102850 99850 0.9708Explanation / Answer
A) Plan Cost in $ Benefits in $ B-C Ratio Decision to Accept the Project Rank A 121000 118000 0.9752 No B 138000 155000 1.1232 Yes 2 C 108000 143000 1.3241 Yes 1 as per the results the C plan should be adopted, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required Investment is at least 1.0 B) if 15% of the costs of each plan are reclassified as disbenefits then the cost will decrease by 15 % and the benefit will remain unchanged Plan Cost in $ Benefits in $ B-C Ratio Cost in $ after Reclassification Benefits in $ B-C Ratio after reclassification Percenatage of Change Rank A 121000 118000 0.9752 102850 118000 1.1473 17.6471 3 B 138000 155000 1.1232 117300 155000 1.3214 17.6471 2 C 108000 143000 1.3241 91800 143000 1.5577 17.6471 1 C) the rankings of benefits remains unchanged in question A and B, because the costs are reclassifiecd at the same percentage, the benefits remain unchanged