For the two projects listed in the table, a) determine the BCR and the NBV b) ar

Question

For the two projects listed in the table, a) determine the BCR and the NBV b) are these projects desirable? c) Which project is most desirable?
Project Project X Y Benefits $48 milllion $27 million Disbenefits $8 million $1 million Net Cost $27 million $10 million

For the two projects listed in the table, a) determine the BCR and the NBV b) are these projects desirable? c) Which project is most desirable?
Project Project X Y Benefits $48 milllion $27 million Disbenefits $8 million $1 million Net Cost $27 million $10 million

Explanation / Answer

a) BCR ( benifit cost ratio ) for X = (48-8)/27

=1.48

NBV for X = (48-8)-27 = $13 million

BCR ( benifit cost ratio ) for Y = (27-1)/10

=2.6

NBV for Y =(27-1)-10

=$16 million

as NBV for both is positive , both projects are desirable

c)As benifit cost ratio (BCR)for Y is greater than X . So most desirable project is Y

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