1. With interest at 10%, what is the benefit-cost ratio for this government proj
ID: 2506089 • Letter: 1
Question
1. With interest at 10%, what is the benefit-cost ratio for this government project?
Enter your answer as follow: 12.34
2.
You borrow $10,000 at 15% per year and will pay off the loan in three equal annual payments with the first occurring at the end of the fourth year after the loan is made. The three equal annual payments will be $6,661.08. Which of the following is true for your first payment at the end of year 4?
Interest = $656.97
Principal = $4,379.77
Interest = $1,983.75
Principal = $3,808.50
Interest = $868.84
Principal = $5,792.25
Interest = $1,725.00
Principal = $3,311.74
Interest = $6,661.08
Principal = $0
Interest = $1,500.00
Principal = $5,161.08
Interest = $2,281.31
Principal = $4,379.77
Interest = $1,412.48
Principal = $4,379.77
Interest = $1,624.35
Principal = $5,036.74
Interest = $0.00
Principal = $6,661.08
Explanation / Answer
1.
PV of the total cost incurred = 206148+(26334/1.1)+(26334/1.1^2) = 251851.64
PV of total benefit = (107609/1.1^3)+(107609/1.1^4)+(107609/1.1^5)+(107609/1.1^6)+(107609/1.1^7)+(107609/1.1^8)+(107609/1.1^9)+(107609/1.1^10) = 474451.30
B-C ratio = 474451.30/251851.64 = 1.884
2.
total amount accumulated at the end of 4th yr = 10000*1.15^4 = 17490.06
therefore the entire amount will be paid as interest = 6661.08
principal paid = 0
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.