A flood control project A will have a first cost of $1.4 million with an annual...

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A flood control project A will have a first cost of $1.4 million with an annual maintenance cost of $40,000 and a 10 year life. Reduced flood damage is expected to amount to $175,000 per year. Lost income to farmers is estimated to be $25,000 per year. A second project B has a first cost of $160,000 with an annual maintenance cost of $30,000 and a 15 year life. Reduced flood damage is expected to amount to $950,000 per year. Lost income to farmers is estimated to be $50,000 per year. At an interest rate of 6% per year, and using the modified B/C method, which of the project(s) should be undertaken (if any)? The projects are independent. A flood control project A will have a first cost of $1.4 million with an annual maintenance cost of $40,000 and a 10 year life. Reduced flood damage is expected to amount to $175,000 per year. Lost income to farmers is estimated to be $25,000 per year. A second project B has a first cost of $160,000 with an annual maintenance cost of $30,000 and a 15 year life. Reduced flood damage is expected to amount to $950,000 per year. Lost income to farmers is estimated to be $50,000 per year. At an interest rate of 6% per year, and using the modified B/C method, which of the project(s) should be undertaken (if any)? The projects are independent.

Answer rating: 100% (QA)

Answer To determine which projects should be undertaken using ... View the full answer