Rad, a manufacturer of luxury watches, charges a higher price for its products than its competitors. Despite the high prices, th
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Answer:
The incremental benefit cost ratio is less than 1 therefore we must select site 1.
Explanation:
The incremental BCR can be determined using the following formula
8% , 10)
⇒
⇒ 8%, 20)
⇒
⇒ = $203,704.42
Incremental initial investment = 203,704.42 - 149,029.49
= $ 54,674.93
Incremental benefits = 580,000 - 520,000 = 60,000
Incremental O&M = 75,000 - 80,000 = - $ 5000
Incremental Disbenefits = 140,000 - 90,000 =$ 50,000
All solving using the present worth method also incremental benefit cost ratio comes out to be 0.2743.
The incremental benefit cost ratio is less than 1 therefore we must select site 1.