The estimated annual cash flows for a proposed municipal government project are costs of $750,000 per year, benefits of $900,000 per year, and disbenefits of $225,000 per year. Calculate the conventional B/C ratio at an interest rate of 6% per year and determine if it is economically justified.
What will be an ideal response?
All values are AW estimates
B/C = (900,000 – 225,000)/750,000 = 0.90 Not justified
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