Answer:
The incremental benefit/cost ratio for Alt A is 2.15 and The incremental benefit/cost ratio for Alt B is 1.35
Explanation:
In order to calculate the incremental benefit/cost ratio for both of the two alternatives we would have to make the following calculations:
For ALT A
PV of benefits = $2,111,404 * [1-(1.06)^-75]/0.06 = $34,744,943.5
Therefore, incremental benefit cost ratio = $34,744,943.5/$16,161,644 = 2.15
The incremental benefit/cost ratio for Alt A is 2.15
For ALT B
incremental benefits = ($3,019,639 -$2,111,404) * [1-(1.06)^-75]/0.06 = $14,945,777.2
incremental benefits = $27,211,376 - $16,161,644 = $11,049,732
Therefore, incremental benefit cost ratio = $14,945,777.2/$11,049,732 = 1.35
The incremental benefit/cost ratio for Alt B is 1.35
