Answer:
The Oklahoma City Zoo
A. What is the B/C ratio?
The B/C ratio is the benefit/cost ratio.
B. What is the B-C?
The benefits = $63,000 (90,000 x $0.70) in the first year
Additional visits = 27,500 x 9 = 247,500
Additional benefits = $173,250 (247,500 x $0.70)
Total benefits = $236,250
The costs =
Initial cost = $305,000
Upkeep, etc = $800,000 ($80,000 x 10 years)
Less salvage value = $63,000
Interest cost = $213,500 (7% of $305,000 x 10 years)
Total costs = $1,255,500
B/C ratio = $236,250/1,255,500 x 100 = 19% approx.
Explanation:
The B/C or Benefit/Cost Ratio is a financial measure that compares the benefits of a project with the costs associated with the project. It attempts to show how the benefits will outweigh the costs.
The benefits that will accrue from the project when compared to the costs will be 19%. This implies that less benefit will be derived from the project.
