The following estimates (in $1000 units) have been developed for a security system upgrade at Chicagos OHare
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The following estimates (in $1000 units) have been developed for a security system upgrade at Chicago’s O’Hare Airport.
(a) Calculate the conventional B/C ratio at a discount rate of 10% per year. Is the project justified?
(b) Determine the minimum first cost that is possible to render the project just economically unjustified.
Item .................................................Cash Flow
First cost, $ ........................................13,000
AW of benefits, $ per year ................3,800
FW of disbenefits, year 20, $ ...........6,750
M&O costs, $ per year ........................400
Life, years ...............................................20
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
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