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    Bsef19a022-NIMRA ABID
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    The document analyzes the costs and benefits of two investment projects (Group A and Group B). It calculates the net present value of investments, annual benefits and costs, and benefit-cost ratios for both projects. The analysis finds that the benefit-cost ratios for both Group A and Group B are less than 1, indicating the projects are not economically justified. It also calculates the net benefits as negative numbers, further confirming the projects would lose money. Therefore, the document concludes that neither investment project is economically viable based on the financial analysis.

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    its a sol

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    The document analyzes the costs and benefits of two investment projects (Group A and Group B). It calculates the net present value of investments, annual benefits and costs, and benefit-cost ratios for both projects. The analysis finds that the benefit-cost ratios for both Group A and Group B are less than 1, indicating the projects are not economically justified. It also calculates the net benefits as negative numbers, further confirming the projects would lose money. Therefore, the document concludes that neither investment project is economically viable based on the financial analysis.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    14 views2 pages

    Quiz Sol

    Uploaded by

    Bsef19a022-NIMRA ABID
    The document analyzes the costs and benefits of two investment projects (Group A and Group B). It calculates the net present value of investments, annual benefits and costs, and benefit-cost ratios for both projects. The analysis finds that the benefit-cost ratios for both Group A and Group B are less than 1, indicating the projects are not economically justified. It also calculates the net benefits as negative numbers, further confirming the projects would lose money. Therefore, the document concludes that neither investment project is economically viable based on the financial analysis.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    GROUP A

    Investment cost
    =15000000/ (1+0.06)10
    =15000000/(1.06)10
    =15000000/1.79
    =$8,379,888per year
    Benefit = $1,500,000 per year
    Disbenefit = $200,000 per year
    M&O cost = $500,000 per year

    Net Benefits= 1,500,000-200,000=1300000


    Net Cost=8,379,888+500,000=8,879,888
    B/C=1300000/8,879,888=0.15
    As B/C <1
    The project is not economically justified
    Alternate Solution
    B – C = (1,500,000 – 200,000) – (8,379,888+500,000) = $ -7.5 million as (B-C)<0
    The project is not economically justified

    GROUP B

    Investment cost
    =15000000/ (1+0.05)10
    =15000000/(1.05)10
    =15000000/1.62
    =$9,259,259year

    Benefit = $1,500,000 per year


    Disbenefit = $200,000 per year
    M&O cost = $500,000 per year

    Net Benefits= 1,500,000-200,000=1300000


    Net Cost=9,259,259+500,000=9,759,259
    B/C=1300000/9,875,000 =0.13
    As B/C <1
    The project is not economically justified
    Alternate Solution
    B – C = (1,500,000 – 200,000) – (9,875,000+ 500,000) = $ -8.5 million as (B-C)<0
    The project is not economically justified

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