A council is considering how to spend its limited funds. It is has two streets that often
Question:
A council is considering how to spend its limited funds. It is has two streets that often suffer from flooding, and is considering installing larger storm drains in one or both of them.
Replacing the drains in Street A has a capital cost of $860,000 and a life of 10 years. Reduction in flooding will have a value of $75,000 per year. At the end of 10 years the drains will need to be replaced, but some of the works can be reused in the future project up to a value of $250,000. The project's discount rate is 20%.
What is the Benefit Cost Ratio for replacing the drains in Street A? (Answer to two decimal places)____________
Replacing the drains in Street B has a capital cost of $1,230,000 and a life of 20 years. Reduction in flooding will have a value of $75,000 per year. At the end of 20 years the drains will need to be replaced, but some of the works can be reused in the future project up to a value of $250,000. The project's discount rate is 17%.
What is the Benefit Cost Ratio for Project B? (Answer to two decimal places) ____________