B C 551,114 505,000 1.099 1

Copyright © 2025 Pearson Education, Inc.Solutions to Chapter 10 Problems

10-1 PW(Benefits) = $45,000(1.42)(P/A, 5%, 10) = %551,114 B – C = $551,114 / $505,000 = 1.099 > 1 The automated switchboard should be installed. 1 / 4

Copyright © 2025 Pearson Education, Inc.10-2 PW(benefits) = 5000(P/A, 10%,5) + 1000(P/G, 10%, 5) + 3000(P/F, 10%, 6) = 27,509.50

B – C = 27,509.50 / 20000 = 1.375 > 1

The investment is worthwhile.

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Copyright © 2025 Pearson Education, Inc.10-3 (a) Sum of benefits minus disbenefits = $725,000 per year B/C Ratio = $725,000 / (0.10 x $6,000,000) = 1.208 Thus plan is acceptable because B/C > 1.0

(b) B/C Ratio = $725,000 / (A/P,10%,20)($6,000,000) = 1.028 This plan is still acceptable to the town.

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Copyright © 2025 Pearson Education, Inc.10-4 Assume an infinite life.

Plant A: B-C = $1,400,000 / [$20,000,000 (0.06)] = 1.167 > 1

Plant A is beneficial. Now we must look to the incremental investment required by Plant B.

B-C = $1,200,000 / [$5,000,000 (0.06)] = 4 > 1

Plant B should be recommended.

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