Five independent projects consisting of reinforcing dams, levees, and embankments are available for funding by a certain public
agency. The following tabulation shows the equivalent annual benefits and costs for each: Project Annual Benefits Annual Costs A $1,800,000 $2,000,000 B $5,600,000 $4.200,000 C $8,400,000 $6,800,000 D $2,600,000 $2,800,000 E $6,600,000 $5,400,000 Assume that the projects are of the type for which the benefits can be determined with considerable certainty and that the agency is willing to invest money in any project as long as the B-C ratio is at least one. Which alternatives should be selected for funding. (Select all your answers from the choices given below.) a. Project Ab. Project Bc.Project Cd.Project De.Project Ef.Select none of the projects
The correct selection is option (b).
Annual benefits and costs for each project are presented.
Calculating the B-C ratio for project A, we find:
Annual benefits = $1,800,000;
Annual costs = $2,000,000;
B-C ratio = Annual benefits / Annual costs = $1,800,000 / $2,000,000 = 0.90.
Project A's B-C ratio is 0.90.
In a similar manner, for project B:
Annual benefits = $5,600,000;
Annual costs = $4,200,000;
B-C ratio = $5,600,000 / $4,200,000 = 1.33.
The B-C ratio for Project B is 1.33.
Following the same calculations for projects C, D, and E yields respective B-C ratios of 1.24, 0.93, and 1.22.
Considering that the agency will fund projects with a B-C ratio of at least 1, projects A and D will not be funded. Among the remaining, Project B offers the highest B-C ratio, making it the selected project.
The solution and relevant data for the exercise are contained within three images. The maximum profit amounts to 262.500.
Explanation
Please take into account the details provided in the exercise. Should you have any queries, feel free to reach out again. All the exercises are illustrated within three images.
Tamarisk should report an inventory amount of $252,000 as of December 31. To arrive at this figure, consider the following calculation: Inventory = Stock on hand + goods acquired from Sheffield Corp + goods sold to Wildhorse Co. This gives us the calculation: $190,000 + $29,000 + $33,000 = $252,000. All relevant amounts were taken into account, including considerations for FOB destination and FOB shipping point, which contribute to the physical inventory count.
