Engineering Board Exam Reviewer · Benefit-Cost Ratio and Payback Period · medium
A highway costs P20 million, requires P0.5 million per year for maintenance, and lasts 20 years. At 8% interest, what minimum uniform annual benefit gives a benefit-cost ratio of 1.0?
- P1,500,000
- P2,037,044.18
- P3,500,000
- P2,537,044.18
Answer
D. P2,537,044.18
Solution
B/C=1 when annual benefits equal the equivalent annual cost: B=20,000,000(A/P,8%,20)+500,000=20,000,000(0.101852)+500,000=P2,537,044.18.
More Benefit-Cost Ratio and Payback Period questions
- An investment of P500,000 returns P100,000, P150,000, P200,000, and P250,000 at the end of years 1 to 4. Find the payback period (ignoring…
- An investment of P100,000 returns P30,000 at the end of each year. At 10% interest, what is the discounted payback period?
- A project has an initial cost of P5,000,000, annual maintenance of P200,000, and annual benefits of P900,000 for 10 years. Find the…
- Alternative 1 costs P1.0 million with a present worth of benefits of P1.4 million. Alternative 2 costs P1.5 million with a present worth…
- A project costs P800,000 and produces net savings of P120,000 per year. Find the simple payback period.