13-15. The four mutually exclusive alternatives below are being compared using the B-C ratio method.
Initial Investment
Incremental B-C ratio when
compared with Alternative
Alternative
($ millions)
B-C ratio
J
20
1.00
K
25
0.95
L
35
1.22
M
45
0.89
J
K
L
M
-
0.40
1.00
2.14
0.72
0.80
0.08
-
13.
With MARR of 10% per year, which alternatives are not feasible? BC Must be ? 1
A. both J and L
B. both K and M
C. Only M
D. Only K
E. All are feasible
14.
Which alternative, if any, should be selected?
A. Alt. J
B. Alt. K
C. Alt. L
D. Alt. M
E. None
15.
If it is estimated that alternative J will produce annual benefits averaging $2.5 million, no market value at
the end of the 25-year life of the project, what is the maximum annual maintenance cost for alternative J, to
justify the project at the 10% per year MARR? Assume modified B-C ratio analysis.
A. $100,000
B. $196,000
C. $256,000
D. $296,000
E. $400,000