Question

Construction Planning And Management

Question 4 (15 points): MarShield Custom Radiation Shielding has $5,000,000 available to spend now in upgrading nationwide plants for manufacturing standard & custom precast concrete, and must decide which project to undertake. Project A is expected to reduce production delays amounting to benefits of$460,000 per year for an investment of $3,000,000 with annual operation and maintenance expenses of$57,000. Project B, costing $4,000,000 initially with operation and maintenance expenses of $81,500 per year, is expected to produce annual savings of $613,000 due to reduced production losses. Each project will have a 50-year useful life and no salvage value for each project. Assume an interest rate of 10%. Use the information above to answer the following questions:

а.Draw the cash flow diagrams for each project.

b. Compute the benefit-cost ratio for each project.

С.Which project should the company select? Explain your answer. (Hint: Check AB/AC)


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