One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with each alternative are available. Use B/C analysis at a discount rate of 8% per year over a 20-year study period to determine which alternative should be selected. For analysis purposes only, assume the flood damage would be prevented in years 3, 9, and 18 of the study period.
 FIGURE 1.png)
PW of cost of Retention = 880,000 + 92,000(P/A,8%,20)
= 880,000 + 92,000(9.8181)
= $1,783,265
PW of cost of Channel = 2,900,000 + 30,000(P/A,8%,20)
= 2,900,000 + 30,000(9.8181)
= $3,194,543
Channel has higher equivalent total cost
PW of ?C = 3,194,543 - 1,783,265
= $1,411,278
PW of ?B = (600,000 - 200,000)[(P/F,8%,3) + (P/F,8%,9) + (P/F,8%,18)]
= 400,000[0.7938 + 0.5002 + 0.2502]
= $ 617,680
?B/C = 617,680/1,411,278
= 0.44
Build Retention Pond; Channel is not justified since ?B/C < 1.0
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