DT will have the larger equivalent total costs PW of ?C for DT = 1 + 10 = $11 million PW of ?B for DT = (700,000 + 400,000)(P/A,6%,30) = (700,000 + 400,000)(13.7648) = $15,141,280 ?B/C = 15,141,280/11,000,000 = 1.38 > 1.0 Select the DT site
What will be an ideal response?
PW 1 of costs = 600,000 + 50,000(P/A,8%,20)
= 600,000 + 50,000(9.8181)
= $1,090,905
PW 2 of costs = 1,100,000 + 70,000(P/A,8%,20)
= 1,100,000 + 70,000(9.8181)
= $1,787,267
Alternative 2 has the larger total cost
?C = PW 2 – PW 1 = 1,787,267 - 1,090,905
= $696,362
PW of incremental benefits for alternative 2:
?B = 950,000 – 250,000
= $700,000
?B/C = 700,000/696,362
= 1.01
Select alternative 2
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