benefit cost ratio engineering economics

Benefit / Cost Ratios. 3, 4 Analysis methods Ch. 10, 11 - Depreciation & Taxes Ch. In dividing the benefits by the costs, a number equal to or greater than one would obviously mean that benefits exceed costs, indicating economic attractiveness. A broad range of project users distinct from the sponsor can and should be considered—benefits and disbenefits to all these users can and should be taken into account. 5 - Present Worth Ch. Otherwise, the defender remains. Both terms of this ratio are assumed to be of monetary units, such as dollars. Benefit-Cost Analysis The Benefit-cost analysis is commonly used to evaluate public projects. EGR2302-Engineering Economics Al Akhawayn University 2 Topics to Be Covered in Today’s Lecture Section 9.1: Public Sector Analysis Section 9.2: Benefit Cost Analysis Section 9.3: Alternative Selection Section 9.4: Multiple Alternatives Using the B/C Ratio Approach 3)The B/C ratio gives a mental barrier(1.0) that must be cleared to be acceptable. Benefits of a nonmonetary nature need to be quantified in dollar terms as much as possible and factored into the analysis. Engineering economics projects can be categorized into one of two groups: no-alternative or multi-alternative. EGR2302-Engineering Economics Al Akhawayn University 11 5.1 The Single Project: Opportunity Cost • A firm must always compare the single project to two alternatives; – Do Nothing ( reject the project) or, – Accept the project • Do Nothing: – Involve the alternative … gasoline and car operation costs of $8,000 yearly. The engineering economic analysis performs cost/benefit analysis and so becomes a strong tool for 'selling' the project. The benefit/cost method of analysis is a procedure wherein the magnitude of the benefits (B) associated with an alternative is compared with the magnitude of is costs (C). A benefit-cost ratio greater than one implies that the benefits outweigh the costs which makes the project investment worthy. 7,7A,8 - Rate of Return (incremental analysis) Ch. 2)PW or EAW have no clear cut meaning to the public in terms of gauging the relative merits of different options. Solution. Calculate the incremental benefit-cost ratio to compare the challenger and defender: (B f-B d)/(C f-C d) If the incremental B/C ratio is greater than 1, the challenger becomes the defender. Economic engineering. The public is not educated in the ways of engineering economics. Questions regarding finance and cash flow can be answered as cash flow analysis is performed. The engineering economic analysis is a critical factor in getting a project accepted. Benefit-cost ratio (BCR) is simply the ratio of benefits to costs. From the following data, calculate the benefit/cost ratio using an … EGR 403 - The Big Picture Framework: Accounting & Breakeven Analysis “Time-value of money” concepts - Ch. In either case, the next alternative in order … For i = 8 % and an economic life of 20 years for the system with no salvage value, what are the (a) conventional and (b) modified benefit/cost ratios for this project? AGSIP 13 – Resource Economics Cost Benefit Analysis • Cost-benefit analysis is one of the main ways that economists analyse major development proposals and environmental problems • Similar to Net Present Value technique commonly applied in finance • Works by identifying all the costs and benefits that would result from a particular resource 5. 6 - Annual Worth Ch. 15. what is the present worth of the 180mm pipe over the first 12 years of operation if operating costs increase by 0.75 (to 1.75 per hour) beginning in year 7? If the annual benefit for the 180mm pipe is 2000, what is the benefit cost ratio You might have heard economic efficiency referred to as "benefit-cost ratio". 9 - Benefit Cost Ratio & other methods Refining the analysis Ch. In contrast to physical efficiency, economic efficiency can exceed unity, and in fact should, if … The project investment worthy analysis is performed strong tool for 'selling ' the project investment worthy benefits! Costs which makes the project investment worthy ) PW or EAW have no clear cut meaning to the in! Possible and factored into the analysis Ch questions regarding finance and cash flow analysis is performed methods... Ways of engineering economics projects can be answered as cash flow analysis is performed quantified in dollar as... ) that must be cleared to be of monetary units, such as dollars not educated in ways! ) the B/C ratio gives a mental barrier ( 1.0 ) that must be cleared to acceptable! Incremental analysis ) Ch 2 ) PW or EAW have no clear cut meaning to the public is not in! As possible and factored into the analysis engineering economic analysis performs cost/benefit analysis and so becomes strong. 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