Check my work 8 One of two alternatives will be selected to

Check my work 8 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 7% 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 2, 10, and 18 of the study period. eBook Retention Pond 940,000 92,000 200,000 Channel 2,500,000 30,000 800,000 Hint Print Initial Cost, $ Annual Maintenance, $/Year Reduced Flood Damage, $ The ??/C ratio is The alternative that should be selected is the (Click to select)

Solution

Year

cash flow -retention pond

cash flow - channel

Incremental cash flow

present value of incremental cash flow at 7% = incremental cash flow/(1+r)^n r= 7%

0

940000

2500000

1560000

1560000

1

-92000

-30000

62000

57943.93

2

108000

770000

662000

578216.4

3

-92000

-30000

62000

50610.47

4

-92000

-30000

62000

47299.5

5

-92000

-30000

62000

44205.14

6

-92000

-30000

62000

41313.22

7

-92000

-30000

62000

38610.48

8

-92000

-30000

62000

36084.56

9

-92000

-30000

62000

33723.89

10

108000

770000

662000

336527.2

11

-92000

-30000

62000

29455.75

12

-92000

-30000

62000

27528.74

13

-92000

-30000

62000

25727.8

14

-92000

-30000

62000

24044.67

15

-92000

-30000

62000

22471.65

16

-92000

-30000

62000

21001.55

17

-92000

-30000

62000

19627.61

18

108000

770000

662000

195861.9

19

-92000

-30000

62000

17143.52

20

-92000

-30000

62000

16021.98

sum of incremental cash flow

1663420

incremental cash outflow

1560000

Incremental benefit cost ratio = sum of incremental benefits/incremental cost

1663420/1560000

1.066295

Year	cash flow -retention pond	cash flow - channel	Incremental cash flow	present value of incremental cash flow at 7% = incremental cash flow/(1+r)^n r= 7%
0	940000	2500000	1560000	1560000
1	-92000	-30000	62000	57943.93
2	108000	770000	662000	578216.4
3	-92000	-30000	62000	50610.47
4	-92000	-30000	62000	47299.5
5	-92000	-30000	62000	44205.14
6	-92000	-30000	62000	41313.22
7	-92000	-30000	62000	38610.48
8	-92000	-30000	62000	36084.56
9	-92000	-30000	62000	33723.89
10	108000	770000	662000	336527.2
11	-92000	-30000	62000	29455.75
12	-92000	-30000	62000	27528.74
13	-92000	-30000	62000	25727.8
14	-92000	-30000	62000	24044.67
15	-92000	-30000	62000	22471.65
16	-92000	-30000	62000	21001.55
17	-92000	-30000	62000	19627.61
18	108000	770000	662000	195861.9
19	-92000	-30000	62000	17143.52
20	-92000	-30000	62000	16021.98
		sum of incremental cash flow		1663420
		incremental cash outflow		1560000
		Incremental benefit cost ratio = sum of incremental benefits/incremental cost	1663420/1560000	1.066295