Could someone explain the process in b) where the best project is chosen? Thank

Question

Could someone explain the process in b) where the best project is chosen? Thank you.

9.3The following table indicates the conventional benefit-cost ratios for 6 projects which are ranked, in terms of their respective initial cost, from smallest (A) to largest (F) B/C Ratios Projects 1.2 1.15 0.8 0.9 1.05 a) Determine which public sector projects are acceptable? All projects with an individual benefit-cost ratio at least equal to unity are acceptable: B, C, D, E and F Tvpical Problems and Solutions Engineering Econ Prepared by: C. Théoret October 2011 COST-BENEFIT ANALYSIS Page 22 b) Determine the best public sector project. Comparing projects B, C, D, E and F: * * * * project B is preferred to project A project C is preferred to project B project C is preferred to project D project E is preferred to project C project E is preferred to project F * Therefore project E is the best public sector project.

Explanation / Answer

We see that C is over B and B is over A

so, C is over B and A and C is over D

So, C is over B,A,D

E is over C.

So, E is over C,B,A,D

E is over F

Hence, E is over C,B,A,D,F

Thus E is over every other projects

Hence, choose E

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