It is recommended that you read through each question carefully.
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| 1 | |
In evaluating an alternative which has benefits, disbenefits and costs, the conventional B/C ratio is written as: |
| | A) | Benefits + Disbenefits
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Costs
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| | B) | Benefits - Disbenefits
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-Costs
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| | C) | Benefits - Disbenefits
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Costs
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| | D) | Benefits
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Costs - Disbenefits
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| 2 | |
The difference between a modified B/C ratio and a conventional B/C ratio is that the modified ratio: |
| | A) | Subtracts M&O (maintenance and operating) costs from the numerator |
| | B) | Places M&O costs in the denominator |
| | C) | Places M&O costs in the numerator and disbenefits in the denominator |
| | D) | Places disbenefits and M&O costs in the denominator |
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| 3 | |
A small flood control dam can be constructed for a cost of $3 million. The annual maintenance cost is expected to be $10,000 per year and damage due to flooding will be reduced from $300,000 per year to $100,000 per year. If the dam is expected to be permanent, the benefit-to-cost ratio at an interest rate of
6% per year is closest to: |
| | A) | 0.55 |
| | B) | 1.05 |
| | C) | 1.57 |
| | D) | 2.02 |
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| 4 | |
The first cost of a permanent road that will improve access to a rural area is $1,000,000. The annual maintenance cost is expected to be $20,000 per year. Improved accessibility will result in benefits of $70,000 per year. At an interest rate of 6% per year, the conventional B/C ratio is nearest to: |
| | A) | 0.833 |
| | B) | 0.875 |
| | C) | 1.25 |
| | D) | 1.75 |
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| 5 | |
The following cash flows are associated with a certain government project:
Benefits ------ $500,000 per year
Disbenefits ----- $200,000 per year
M&O Costs ----- $50,000 per year
Initial Investment Cost ----- $1,500,000
Project life ------ 10 years At an interest rate of 6% per year, the conventional B/C ratio is closest to: |
| | A) | 0.21 |
| | B) | 0.99 |
| | C) | 1.81 |
| | D) | 2.76 |
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| 6 | |
The initial cost of a federal highway project is $4 million. The road will require maintenance at a cost of $50,000 per year during its 20 year life. If benefits of $300,000 per year have been identified, the B/C value at an interest rate of 6% per year is closest to: |
| | A) | 0.75 |
| | B) | 0.91 |
| | C) | 1.00 |
| | D) | 1.36 |
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| 7 | |
Improvements to a national park will have a first cost of $600,000 and an annual maintenance cost of $40,000. If overhauls costing $60,000 are done every five years, the improvements will last indefinitely. If the benefits associated with the improvements are estimated to be $100,000 per year, the B/C ratio at an
interest rate of 6% per year is nearest to: |
| | A) | 0.74 |
| | B) | 0.95 |
| | C) | 1.01 |
| | D) | 1.15 |
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| 8 | |
A federal highway project is expected to have a first cost of $5 million and an annual maintenance cost of $200,000. Shoulder replacement costs of $1,000,000 will be required in 10 years. Benefits to the road-users are expected to be $800,000 per year. If the project will have a 20 year life, the B/C ratio at an
interest rate of 6% per year is closest to: |
| | A) | 0.89 |
| | B) | 1.01 |
| | C) | 1.17 |
| | D) | 1.31 |
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| 9 | |
A water conservation project funded by the federal government will have an initial cost (year 0) of $1 million and an upgrade cost of $300,000 in year five. The annual operating costs are expected to be $100,000. The water saved is valued at $200,000 in years one through four, and $50,000 each year thereafter through the 10 year life of the project. If the water saved is considered to be a benefit to the people, the B/C ratio at an interest rate of 6% per year is closest to: |
| | A) | 0.45 |
| | B) | 0.59 |
| | C) | 0.93 |
| | D) | 1.18 |
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| 10 | |
A water utility is planning to construct a grease treatment facility so that local haulers will not have to transport grease to a city 550 km away. The facility will cost $400,000 to build and $160,000 per year to operate. Benefits to the haulers and restaurant owners (through reduced costs) are expected to be $250,000 per year. If the facility will have a 10-year life, the B/C ratio at 6% per year is closest to: |
| | A) | 0.63 |
| | B) | 0.84 |
| | C) | 1.02 |
| | D) | 1.17 |
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