Using benefit-cost ratio analysis, a 10-year useful life, and a 25% MARR, determine which of the following mutually

Question

Using benefit-cost ratio analysis, a 10-year useful life, and a 25% MARR, determine which of the following mutually exclusive alternatives should be selected. A B ? D E $300 $400 $500 Cost $100 Annual benefit 37 $205 60 83 137 150 Recommendation: Oprion E Recommendation: Oprion D O Recommendation: Oprion C Recommendation: Oprion B

Help In Homework · Accepted Answer

Option 2. From the below table we can observe that alternative D needs to be selected as the B:C ratio is highest among the given options after alternative A Y Discount Factor A Discounted Cash flow A B Discounted Cash flow B C Discounted Cash flow C D Discounted Cash flow D E Discounted Cash flow E 0 1.00 100 100.00 205 205.00 300 300.00 400 400.00 500 500.00 1 0.80 37 29.60 60 48.00 83 66.40 137 109.60 150 120.00 2 0.64 37 23.68 60 38.40 83 53.12 137 87.68 150 96.00 3 0.51 37 18.94 60 30.72 83 42.50 137 70.14 150 76.80 4 0.41 37 15.16 60 24.58 83 34.00 137 56.12 150 61.44 5 0.33 37 12.12 60 19.66 83 27.20 137 44.89 150 49.15 6 0.26 37 9.70 60 15.73 83 21.76 137 35.91 150 39.32 7 0.21 37 7.76 60 12.58 83 17.41 137 28.73 150 31.46 8 0.17 37 6.21 60 10.07 83 13.93 137 22.98 150 25.17 9 0.13 37 4.97 60 8.05 83 11.14 137 18.39 150 20.13 10 0.11 37 3.97 60 6.44 83 8.91 137 14.71 150 16.11 Cost 100.00 Cost 205.00 Cost 300.00 Cost 400.00 Cost 500.00 Benefit 132.11 Benefit 214.23 Benefit 296.35 Benefit 489.16 Benefit 535.58 B:C 1.32 B:C 1.05 B:C 0.99 B:C 1.22 B:C 1.07

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Using benefit-cost ratio analysis, a 10-year useful life, and a 25% MARR, determine which of the following mutually exclusive alternatives should be selected

Expert Solution

Archived Solution

Y	Discount Factor	A	Discounted Cash flow A	B	Discounted Cash flow B	C	Discounted Cash flow C	D	Discounted Cash flow D	E	Discounted Cash flow E
0	1.00	100	100.00	205	205.00	300	300.00	400	400.00	500	500.00
1	0.80	37	29.60	60	48.00	83	66.40	137	109.60	150	120.00
2	0.64	37	23.68	60	38.40	83	53.12	137	87.68	150	96.00
3	0.51	37	18.94	60	30.72	83	42.50	137	70.14	150	76.80
4	0.41	37	15.16	60	24.58	83	34.00	137	56.12	150	61.44
5	0.33	37	12.12	60	19.66	83	27.20	137	44.89	150	49.15
6	0.26	37	9.70	60	15.73	83	21.76	137	35.91	150	39.32
7	0.21	37	7.76	60	12.58	83	17.41	137	28.73	150	31.46
8	0.17	37	6.21	60	10.07	83	13.93	137	22.98	150	25.17
9	0.13	37	4.97	60	8.05	83	11.14	137	18.39	150	20.13
10	0.11	37	3.97	60	6.44	83	8.91	137	14.71	150	16.11
		Cost	100.00	Cost	205.00	Cost	300.00	Cost	400.00	Cost	500.00
		Benefit	132.11	Benefit	214.23	Benefit	296.35	Benefit	489.16	Benefit	535.58
		B:C	1.32	B:C	1.05	B:C	0.99	B:C	1.22	B:C	1.07