Question: In the aftermath of Hurricane Thelma, the U.S. Army Corps of Engineers is considering two alternative approaches to protect a freshwater wetland from the encroaching seawater during high tides. The first alternative, the construction of a 5-mile long, 20-foot-high levee, would have an investment cost of $25,000,000 with annual upkeep costs estimated at $725,000. A new roadway along the top of the levee would provide two major benefits:
(1) improved recreational access for fishermen and
(2) reduction of the driving distance between the towns at opposite ends of the proposed levee by 11 miles.
The annual benefit for the levee has been estimated at $1,500,000. The second alternative, a channel-dredging operation, would have an investment cost of $15,000,000. The annual cost of maintaining the channel is estimated at $375,000. There are no documented benefits for the channel-dredging project. Using a MARR of 8% and assuming a 25-year life for either alternative, apply the incremental B-C ratio (!B/!C) method to determine which alternative should be chosen. (Note: The null alternative, Do nothing, is not a viable alternative.)