Two alternatives have been proposed for a government project. The estimated costs associated with each alternative are given below. Use the modified B-C ratio method to determine which alternative should be selected at an interest rate of 3% per year.
Initial cost, \$
Alternative I
\$1,250,000
Alternative II
\$1,050,000
Annual maintenance, \$/yr
\$180,000
\$125,000
Annual benefits, \$/yr
\$550,000
\$540,000
Salvage value, \$
\$11,000
\$9800
Project life, years
30
30
Modified B-C ratio
5.83
7.78