Question: A proposal has been made for improving the downtown area of a small town. The plan calls for banning vehicular traffic on the main street and turning this street into a pedestrian mall with tree plantings and other beautification features. This plan will involve actual costs of $6,000,000 and, according to its proponents, the plan will produce benefits and dysgenesis to the town as follows:
Benefits:
Increased sales tax revenue $450,000 per year
Increased real estate property taxes $325,000 per year
Benefits due to decreased air pollution $80,000 per year
Quality of life improvements to users $70,000 per year
Disbenefits:
Increased maintenance $175,000 per year
a. Compute the B-C ratio of this plan based on a MARR of 10% per year and an infinite life for the project.
b. How does the B-C ratio change for a 20-year project life?