QUESTION 4
Federal Electricity & Water Authority (FEWA) has two renewal energy alternatives are available for providing energy at a remote government research facility. The cash flow
estimates associated with each alternative are given below. Use the conventional B-C ratio method, with Annual Worth, as the
determine
which alternative should be selected at an interest rate of 10% per year over a 25-year study period. One alternative must be selected
d
Alternative I
Alternative II
Initial cost, $
$1,000,000
$990,000
Annual maintenance costs,
$/yr
$380,000
$359,500
Annual benefits, $/yr
$500,000
$459,500
Salvage value, $
$17,000
$15,800
A. 1.02
Benefit Cost ratio for Alternative I:
B. 1.06
Benefit Cost ratio for Alternative II:
C. 0.231
Incremental Benefit Cost Ratio
D. Alternative I
Alternative selected
E. Alternative II
F. 1.60
G. 1.20
H. 0.30