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Compute the benefit-cost ratio for trade route option

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Even during the high emotions and brutal battles of the Crusades, trade must go on. Descendants of The Family have expanded their trade routes to Europe and far into Asia, including trade in jade (China), emeralds (central Africa), and lutefisk (Scandinavia). Naturally, each route present different benefits and costs.

Africa (emeralds) . China (jade) . Scandinavia (lutefisk)Scandinavia (lutefisk)

PV Gross Benefits 260,000 405,000 315,000

PV Operating Costs . 85,000 85,000 130,000

PV Capital Costs . 100,000 200,000 110000

a. Compute the Benefit/Cost ratio for each trade route option, where "Benefit" is the "Net-Benefit", i.e., defined as the Gross Benefits minus the Operating Cost.

b. Re-compute the Benefit/Cost ratio where the "Benefit" is the Gross Benefit and the "Cost" is the sum of the Operating Costs and the Capital Costs.

c. Do these different ratios give consistent ratios? Explain.

d. Based on the financial information you have calculated, which of the routes should be pursued, if resources are available to do only one of the three?

Reference no: EM132459835

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