Compute a modified b-c ratio

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Reference no: EM132771075

The city of Angola, Indiana is considering building a snowmobile trail on the land owned by the city. The life of the project is assumed to be 20 years. Building the trail would require an investment of $140,000 from the public funds. The annual maintenance would require an additional $25,000 per year. The annual benefits to the public of using the trail are estimated to be equivalent to $40,000 per year. After 20 years, the city will sell the right to operate the trail to the Angola Snowmobile Club, Inc. for $10,000.

Problem 1: Compute a MODIFIED B-C ratio, using the present worth method, for the project, determine whether it should be accepted, and explain why. Make sure you use the formula appropriate for the modified B-C ratio. Assume 4% cost of capital.

Reference no: EM132771075

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