The US Department of Interior Is Planning to Build a Dam

Essay

The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power plant. In
addition to producing electric power, this project will provide flood control, irrigation, and recreational
benefits. The estimated benefits and costs expected to be derived from the three alternatives under
consideration are listed as follows: The interest rate is 5%, and the life of each project is estimated to be 40 years.
(a) Find the benefit-cost ratio for each alternative.
(b) Select the best alternative, according to BC(i).