Business, 24.04.2020 19:26 ameliaxbowen7

The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway. Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees and shrubbery, as well as maintaining the greenway, are summarized below. The city’s discount rate is 8% per year, and the planning horizon is 10 years. (10.9)

Use the B–C ratio method to recommend the best plan when annual maintenance expenses offset annual benefits in the numerator.

Repeat Part (a) when annual maintenance expenses add to total costs in the denominator. Which plan is best?

Landscaping Plan

A

B

C

Initial planting

$75,000

$50,000

$65,000

cost

Annual maintenance

4,000

5,000

4,700

expense

Annual community

20,000

18,000

20,000

benefits

Should the recommendations in Part (a) and (b) be the same? Why or why not?

Answers: 3

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