2 shown below are for projects to be considered to ed road i

2. shown below are for projects to be considered to ed road intersection in Sharjah. Using a B/C analysis, at per year and a 10 year study period. You are required prove the traffic at a to do the following: a. Calculate the B/C ratio for alternative A b. Calculate the B/C ratio for alternative B C. Do the incremental B/C analysis d. Choose the best alternative Alternative A Alternative First cost, S Annual M & O, $/year Benefits, $/year Dis-benefits, $/year 38,000 49,000 110,000 26,000 87,000 64,000 160,000 1, B/C ratio for alternative A 2. B/C ratio for alternative B 3. The incremental B/C ratio 4. The best alternative

Solution

2.

R = 7%

Time = 10 years

Annualized first cost for alternative A = 38000/((1-1/1.07^10)/.07) = $5410.35

Annualized first cost for alternative B = 87000/((1-1/1.07^10)/.07) = $12386.84

A.

B/C ratio for alternative A = (annual benefits – annual disbenefits)/total annual cost

B/C ratio for alternative A = (110000-26000)/(5410.35+49000)

B/C ratio for alternative A = 1.54

B.

B/C ratio for alternative B = (annual benefits – annual disbenefits)/total annual cost

B/C ratio for alternative B = (160000-0)/( 12386.84 + 64000)

B/C ratio for alternative B = 2.09

C.

Increment annual first cost = (12386.84 - 5410.35) = $6976.49

Incremental annual M & O cost = 64000-49000 = $15000

Incremental annual benefits = 160000-110000 = $50000

Incremental annual disbenefits = 0-26000 = -$26000

So,

Incremental B/C ratio (B over A) = (50000 - (-26000))/(6976.49+15000)

Incremental B/C ratio (B over A)= 3.46

D.

Since, incremental B/C ratio of B over A, is 3.46 and B/C ratio of B is greater than that of A, then alternative B should be selected.