The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power...

 

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The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power plant. 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 as follows: Design Alternatives A B $100M $20M Initial investment Annual recurring benefits Annual recurring $160M $220M $40M $60M $8M $18M $25M costs Salvage value The interest rate is 5%, and the life of each project is estimated to be 40 years. (a) Find the benefit-cost ratio for each alternative. (b) Select the best alternative, according to BC(i). The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power plant. 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 as follows: Design Alternatives A B $100M $20M Initial investment Annual recurring benefits Annual recurring $160M $220M $40M $60M $8M $18M $25M costs Salvage value The interest rate is 5%, and the life of each project is estimated to be 40 years. (a) Find the benefit-cost ratio for each alternative. (b) Select the best alternative, according to BC(i).

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a Benefit Cost ratio Benefit cost ratio can be calculated as follows Annual bene... View the full answer