Please help with b and c In the development of a publicly ow

Please help with b and c

In the development of a publicly owned, commercial waterfront area, three possible independent plans are being considered. Their costs and estimated benefits are given in the table to the right. a. Which plan(s) should be adopted, if any, if the controlling board wishes to invest any amount required, provided that the B-C ratio on the required investment is at least 1.0? b. Suppose that 10% of the costs of each plan are reclassified as disbenefits, what percentage change in the B-C ratio of each plan results from the reclassificati c. Comment on why the rank-orderings in (a) are unaffected by the change in (b). PW ($000s) Plan Costs A $102,000 S145,000 108,000 138,000 138,000 127,000 1.4216 0.7826 1.0866 Yes No b. Suppose that 10% o the cost o plan are reclassified as disbenefits. Calculate he now costs. B-C ratio and pero tage change in the B-C ratio of each plan. Type the absolute values B-C ratio to four decimal places. Round the B-C ratio percentage change to one decimal place.) Round the cos110 he nearest dollar. Round the Plan PW of Costs PW of Benefits Inc. B-C ratio Percentage change, % 91800

Solution

b) When 10% of the costs are reclassified as disbenefits that means the costs are now 10% lower than before. Hence now the costs will be:

A: 102000 - 10% of 102000 = 91800 B-C ratio = 145000/91800 = 1.58 from 1.42 which is change of 11.27%

B: 138000 - 10% of 138000 = 124200 B-C ratio = 108000/124200 = 0.87 from 0.78 which is change of 11.53%

C: 127000 - 10% of 127000 = 114300 B-C ratio = 138000/114300 = 1.21 from 1.09 which is change of 11%.

c) The rank orderings in (a) will remain unaffected by the change in (b) because 10% of the costs from each of the project has been reclassified as disbenefits. So there is a uniform cut across all costs which leads to a similar change in the B-C ratio of all the projects. Now if the change is of a similar percentage in the same direction, it is unlikely that the order shall change.