Acity government is considering two types of town-dump sanitary systems. design a requires an initial outlay of $4 with annual operating and maintenance costs of $5 for the next 15 years; design b calls for an investment of $3 with annual operating and maintenance costs of $8 per year for the next 15 years. select the better system based on bc analysis at 8% social discount rate (same as marr).

We will be considering design A.

Explanation:

By applying B/C analysis following interpretation take place:

For Design A:

Investment (I) = USD 400,000

Cost (C) = USD 50,000 (P/A) which is (8%,15)

we will get USD 427,974

For Design B:

Investment (I)= USD 300,000

Cost (C) = USD 80,000 (P/A) which is (8%,15)

we will get USD 684,758

B/C modified:

= (Cost of A- Cost of B) ) / (Investment of A - Investment of B)  

= (427,974 - 684,758))/(400,000-300,000)

= 2.56 Answer

answer(d) all of the choices are correct;

answerdata mart;