In the development of a publicly owned, commercial waterfront area, three possib
ID: 2614803 • 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 . Which planls) should be adopted, fany i the controling board wishes to inest any amount required,provided that the B-C ratio on the required investment PW (S000s) is at least 1.02 b. Suppose that 10% 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). PlanCosts Benefits A $132,000 $121.000 01,000160,000 143,000 8 123,000Explanation / Answer
Answer A)
As per condition B-C ratio >= 1.
Answer b)
Answer C)
There is no change in rank of plan in A and B ,
Since % change in B-C ratio for all plans are same .
Plan Cost Benefit B-C ratio Adoption A 132,000 121,000 0.917 No B 101,000 160,000 1.584 Accepted C 123,000 143,000 1.163 Accepted