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make a benefit/cost analysis by finding B/C for a project with a total PW of cost...

make a benefit/cost analysis by finding B/C for a project with a total PW of cost of $6,859, annual benefits of $ 1,723, annual disbenefits of $487, interest rate of 6% and life of 6 years

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Answer #1

Annual worth of net costs = 6,859(A/P, 6%, 6)

                                   = 6,859(0.2034)

                                   = 1,395.12

Annual worth of net benefits = 1,723 - 487 = $1,236

B/C ratio = Annual worth of net benefits / Annual worth of net costs

              = 1,236 / 1,395.12

              = 0.89

Since the B/C ratio is less than 1, therefore, the project is not financially feasible.

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