¥B-C for one or several alternatives
¥Compares both benefits & costs
–Bt/(1+r)t, where Bt is the benefit to be received in year t,
and r is the discount
rate
–Ct/(1+r)t, where Ct is the cost to be received in year t,
and r is the discount rate
¥
n
–B/C = · Bt/(1+r)t , where B/C = present value B/C ratio
–
t=0 Ct/(1+r)t
¥What is to be B-C goal?
–max. net PV (PVB-PVC = net PV)?
–Max. B/C
ratio?
¥How to choose r? How to treat Ònegative effectÓ – as positive costs or negative benefits? How to treat scale effects?