A group of managers analyze both the internal strengths and weaknesses of their organization as well as the opportunities and th
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Answer:
a. B/C Ratio = 0.296
b. B/C Ratio = 2.964
c. Y = 12.05 USD will be the maximum amount charged by the manager.
Y = 12.05 x 10 = 120.54 USD for the whole group of 10
Explanation:
Solution:
Data Given:
Number of Individuals = 10
Number of Stones = 100
Life Expectancy = 10 Years
Annual benefit = 8.25 USD
Stone Removal Cost = 2.50 USD
Interest Rate = 2%
a. If all the stones are removed by one individual:
Cost = 100 stones x Stone Removal Cost
Cost = 100 x 2.50 = 250 USD
Now, we have to calculate the Benefit/Cost Ratio for this individual by using the following formula:
B/C Ratio =
Where,
AB = Annual Benefit = 8.25 USD
(P/A, 2%, 10) = 8.983 (From the compound interest table)
Cost = 250 USD
B/C Ratio =
B/C Ratio = 0.296
b. Each individual removing 10 stones.
Number of individuals = 10
So, the cost of removing the stones will be:
Cost = 10 x 2.50 = 25 USD
So,
B/C Ratio =
B/C Ratio =
B/C Ratio = 2.964
c.
In this part, we are already given the B/C ratio, now we need to calculate the maximum amount charged by the manager for the help.
B/C ratio = 2
Let, Y be the amount of the manager. So,
B/C Ratio =
Plugging in the values and solving for Y:
2 =
50 + 2Y = 8.25 x 8.983
2Y = 74.109 - 50
2Y = 24.109
Y = 24.109/2
Y = 12.05 USD will be the maximum amount charged by the manager.
Y = 12.05 x 10 = 120.54 USD for the whole group of 10