Purchase Solution

Benefit Cost Ratio (BCR)

Not what you're looking for?

Ask Custom Question

LA Transportation is considering investing in new buses. The first cost of these new buses is $20 million. This cost will be spread equally over a 4-year period and paid at the beginning of the first year. These new buses will bring in initial revenue of $2.5 million, and revenue will increase by $0.75 million each year till the end of this project. The annual O&M cost is $7 million. This project will also cause an energy saving of $14 million yearly to the public. The economic life for these new buses is 10 years. There will not be any salvage value at the end of this project. Assume LA Transportation is a governmental entity. The MARR is 18%.
Calculate the Conventional and the Modified BCR for this project. Should this investment be made? Why?
(Modified BCR = ((B-D) - (C-R)) / I)

Purchase this Solution
Solution Summary

Calculates the Conventional and Modified Benefit Cost Ratio (BCR).

Solution Preview

See attached file

LA Transportation is considering investing in new buses. The first cost of these new buses is $20 million. This cost will be spread equally over a 4-year period and paid at the beginning of the first year. These new buses will bring in initial revenue of $2.5 million, and revenue will increase by $0.75 million each year till the end of this project. The annual O&M cost is $7 million. This project will also cause an energy saving of $14 million yearly to the public. The economic life for these new buses is 10 years. There will not be any salvage value at the end of this project. Assume LA Transportation is a governmental entity. The MARR is 18%.

Calculate the Conventional and the Modified BCR for this project. Should this investment be made? Why?
(Modified ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • Economics: Benefit-cost ratio.

    The problem deals with estimating the benefit-cost ratio from provided information.

  • Chemical-genetic study design elucidate Downstream Signal Chain

    Besides BCR-ABL, imatinib also inhibits KIT, a receptor tyrosine kinase that can be activated by BCR-ABL and a positive regulator of expansion of bone marrow cells.

  • Considerations in targeted therapy for cancers

    Bevacizumab has been investigated in non-Hodgkin lymphoma, but it was found to have a poor risk-benefit ratio and is not recommended by treatment guidelines.

  • Leukemia and the Philadelphia Chromosome

    Again specific to the Philadelphia chromosome, the resulting swap creates the oncogene BCR-ABL on the shortened chromosome 22, via fusion of the chromosome 9 segment into chromosome 22. This oncogene codes for the Bcr-abl fusion protein.

  • DNA translocation and cancer

    In this translocation the 5' end of BCR (including it's promoter and regulatory regions) from chromosome 22 is translocated onto chromosome 9 upstream of ABL, a proto-oncogene.

  • Supervisory Training: Cost-Benefit Ratio & ROI

    The cost-benefit ratio is: The expected benefit for the year divided by the total cost of the plan. Define the expected amount of return and divide by all the costs of the project.

  • Finance-Benefit Cost

    analysis by following and will choose highest Benefit/Cost ratio: Benefit/Cost : Proposal Cost of Treating 100 Patients 1000s of Patient lives saved.

  • Benefit Cost Ratio of a New Park

    Anna, 108710 ========= Cost = $100,000 + 1,200,000 + 50,000*(1-(1/(1+9%)^10))/9% = $1,620,882.9 Benefit = 280,000*(1-(1/(1+9%)^10))/9% = $1,796,944.20 Benefit-cost ratio = 1.11 The expert examines the benefit cost ratios of a new park.

  • Cost-Benefit Ratio and HRIS

    604725 Cost-Benefit Ratio and HRIS Identify what factors human resource managers would use in developing a cost-benefit ratio to support the decision to purchase future HRIS?

View More Related Solutions