The B/C ratio for a flood control project along the Swanee River was calculated to be 1.3. If the benefits were $500,000 per year and the maintenance costs were $200,000 per year, determine the initial cost of the project at an interest rate of 7% per year and a 50-year life.
What will be an ideal response?
C = P(A/P,7%,50) + 200,000
= P(0.07246) + 200,000
1.3 = 500,000/[P(0.07246) + 200,000]
1.3[P(0.07246) + 200,000] = 500,000
P = $2,547,825
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