The estimates shown are for a
Answer:
EastLocation:
Annual worth of net costs = 11,000,000(A/P, 6%, infility) +100,000
= 11,000,000 * 0.06 + 100,000
= 660,000 + 100,000
= 760,000
Annual worth of net benefits = 990,000 – 120,000 = 870,000
B/C ratio = Annual worth of net benefits / Annual worth of netcosts
= 870,000 / 760,000
= 1.14
WestLocation:
Annual worth of net costs = 27,000,000(A/P, 6%, infility) +90,000
= 27,000,000 * 0.06 + 90,000
= 1,620,000 + 90,000
= 1,710,000
Annual worth of net benefits = 2,400,000 – 100,000 =2,300,000
B/C ratio = Annual worth of net benefits / Annual worth of netcosts
= 2,300,000 / 1,710,000
= 1.34
Since the B/C ratio of West Location is greater than EastLocation, therefore, West Location bridge should be built.
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