Check my work 8 One of two alternatives will be selected to reduce flood damage
ID: 2822201 • Letter: C
Question
Check my work 8 One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with each alternative are available. Use B/C analysis at a discount rate of 7% per year over a 20-year study period to determine which alternative should be selected. For analysis purposes only, assume the flood damage would be prevented in years 2, 10, and 18 of the study period. eBook Retention Pond 940,000 92,000 200,000 Channel 2,500,000 30,000 800,000 Hint Print Initial Cost, $ Annual Maintenance, $/Year Reduced Flood Damage, $ The ??/C ratio is The alternative that should be selected is the (Click to select)Explanation / Answer
Year
cash flow -retention pond
cash flow - channel
Incremental cash flow
present value of incremental cash flow at 7% = incremental cash flow/(1+r)^n r= 7%
0
940000
2500000
1560000
1560000
1
-92000
-30000
62000
57943.93
2
108000
770000
662000
578216.4
3
-92000
-30000
62000
50610.47
4
-92000
-30000
62000
47299.5
5
-92000
-30000
62000
44205.14
6
-92000
-30000
62000
41313.22
7
-92000
-30000
62000
38610.48
8
-92000
-30000
62000
36084.56
9
-92000
-30000
62000
33723.89
10
108000
770000
662000
336527.2
11
-92000
-30000
62000
29455.75
12
-92000
-30000
62000
27528.74
13
-92000
-30000
62000
25727.8
14
-92000
-30000
62000
24044.67
15
-92000
-30000
62000
22471.65
16
-92000
-30000
62000
21001.55
17
-92000
-30000
62000
19627.61
18
108000
770000
662000
195861.9
19
-92000
-30000
62000
17143.52
20
-92000
-30000
62000
16021.98
sum of incremental cash flow
1663420
incremental cash outflow
1560000
Incremental benefit cost ratio = sum of incremental benefits/incremental cost
1663420/1560000
1.066295
Year
cash flow -retention pond
cash flow - channel
Incremental cash flow
present value of incremental cash flow at 7% = incremental cash flow/(1+r)^n r= 7%
0
940000
2500000
1560000
1560000
1
-92000
-30000
62000
57943.93
2
108000
770000
662000
578216.4
3
-92000
-30000
62000
50610.47
4
-92000
-30000
62000
47299.5
5
-92000
-30000
62000
44205.14
6
-92000
-30000
62000
41313.22
7
-92000
-30000
62000
38610.48
8
-92000
-30000
62000
36084.56
9
-92000
-30000
62000
33723.89
10
108000
770000
662000
336527.2
11
-92000
-30000
62000
29455.75
12
-92000
-30000
62000
27528.74
13
-92000
-30000
62000
25727.8
14
-92000
-30000
62000
24044.67
15
-92000
-30000
62000
22471.65
16
-92000
-30000
62000
21001.55
17
-92000
-30000
62000
19627.61
18
108000
770000
662000
195861.9
19
-92000
-30000
62000
17143.52
20
-92000
-30000
62000
16021.98
sum of incremental cash flow
1663420
incremental cash outflow
1560000
Incremental benefit cost ratio = sum of incremental benefits/incremental cost
1663420/1560000
1.066295