Use the estimates from Problem 9.39 (repeated below) to answer the questions asked concerning the extraction of rare metals in a National Wildlife Preserve. Utilize the B/C method, a 5-year study period, and a discount rate of 10% per year. The monetary unit is $ million.

(a) Which site is the best economically?

(b) What is the minimum benefits estimate necessary to make site B the best of the three options? Assume that ΔB/C must be at least 1.01 and that all other estimates remain as quoted.

(c) For the original estimates, if site A is eliminated for environmental reasons, is site B or C acceptable?

Data from problem 9.39

The Department of Defense is considering three sites in the National Wildlife Preserve for extraction of rare metals. The cash flows associated with each site are summarized. The extraction period is limited to 5 years and the interest rate is 10% per year. Use the B/C method to determine which site, if any, is acceptable. The monetary unit is $ million.

Transcribed Image Text:

A Site Initial cost, $ Annual cost, $/year Annual benefits, $/year Annual disbenefits, $/year 50 3 90 200 6. 4 29 20 61 0.5 2 2.1