The federal government is planning a hydroelectric project for a river basin. In addition to producing electric power, this project will provide flood control, irrigation, and recreational benefits. The estimated benefits and costs expected to be derived from the three alternatives under consideration are listed in Table P16.12.
The interest rate is 10%, and the life of each of the projects is estimated to be 50 years.
(a) Find the benefit-cost ratio for each alternative.
(b) Select the best alternative on the basis of BC(i)-
Table P16.12

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Decision Alternatives Initial cost $8,000,000 $10.000.000 $15,000.000 Annual benefits or costs: Power sales Flood-control savings Irrigation benefits Recreation benefits $1,000,000 250,000 350.000 100,000 200,000 $1,200,000 $1,800,000 500,000 600,000 350,000 350,000 350,000 450,000 200,000 250.000 O&M costs