Three Independent Projects Are Available for a Secret Government Agency

Essay

Three independent projects are available for a secret government agency. The estimated costs associated with each alternative are given below. Use the conventional B- C ratio method to determine which alternative(s), if any, should be selected at an interest rate of 7% per year. Assume a project life of 20 years and a B- C ratio of at least 1 for evaluation. $$\begin{array} { | l | l | l | l | } \hline & \text { Project } A & \text { Project } B & \text { Project } C \\\hline \text { itial cost, } \$ & \$ 1,300,000 & \$ 1,200,000 & \$ 1,450,000 \\\hline \text { nnual benefits, } \$ / y e a r & \$ 490,000 & \$ 450,000 & \$ 535,000 \\\hline \text { nnual disbenefits, } \$ / y e a r & \$ 310,000 & \$ 280,000 & \$ 345,000 \\\hline\end{array}$$