Case Study 16
A project has the following cost and benefit data.
Initial Cost = $15M
Annual O&M Cost = $500K
Annual Benefit = $4M
The life has the following Probability distribution.
$$\begin{array} { l l }
\text { Life } & \text { Probability } \
7 & 0.20 \
8 & 0.50 \
9 & 0.30
\end{array}$$ MARR = 8%
-Compute the conventional B/C ratio using the expected EUAC.

Question

Case Study 16
A project has the following cost and benefit data.
Initial Cost = $15M
Annual O&M Cost = $500K
Annual Benefit = $4M
The life has the following Probability distribution.
 $$\begin{array} { l l } 
\text { Life } & \text { Probability } \
7 & 0.20 \
8 & 0.50 \
9 & 0.30
\end{array}$$ MARR = 8%
-Compute the conventional B/C ratio using the expected EUAC.

Quizplus · Accepted Answer

The expected EUAC is:EUAC = (15,000,000)(A/P,8%,8) + (500,000)(A/F,8%,8)= (15,000,000)(0.1699) + (500,000)(0.5762)= $2,548,500The expected annual benefit is:E(B) = (4,000,000)(0.20) + (4,000,000)(0.50) + (4,000,000)(0.30)= $4,000,000The conventional B/C ratio is:B/C = E(B) / EUAC= 4,000,000 / 2,548,500= 1.290

Case Study 16 a Project Has the Following Cost and Benefit

Case Study 16
a Project Has the Following Cost and Benefit