The benefits of an engineering project are expected to become 1200 at the end of the first year

and 12000 at the end of 10 th year by linear increase and to remain constant by the end of 30 th
year. It is also expected that the project will be sold by 15000(scrap value) at the end of 30
years. The costs of the same project are given as follows (i=0.03)

8.000 (operation and maintenance costs)

20.000 (investment cost)

a) Find the present equivalent of benefits.

b) Find the present equivalent of costs.
c) Find the net present value (B-C) of the project.
d) Find the marginal benefit (B/C) of the project
e) Repeat a-d based on uniform values
f) Repeat a-d based on future values

Cash flow diagram

15000

12000
12000

2400
1200 ……..
0 1 10 30

8.000 (maintenance and operation costs)

20.000(investment cost)
 Benefit Cost Analysis by present values
a) Present equivalent of benefits = Present value of linearly increasing series + Present
value of uniform series + Present value of scrap value

Present value of linearly increasing series

Pl

(1 + 𝑖) − (1 + 𝑁𝑖 + 𝑖)
𝑃 =𝐺
𝑖 (1 + 𝑖)

( . ) ( ∗ . . )
𝑃 = 1200 =53806
. ( . )

Present value of uniform series

P u 10
 (1 + 𝑖) − 1
𝑃=𝐴
𝑖(1 + 𝑖)
( . )
P u 10 = 12000 =178529
. ( . )

P u 10

0 10

P u0

Pu0= = =132842
( ) ( . )

Present value of scrap value

15000

0 30

Ps

Ps= = =6179
( ) ( . )
Present equivalent of all benefits = Present value of linearly increasing series + Present value of uniform
series + Present value of scrap value=53806+132842+6179=192827 TL

b) Present equivalent of costs

8.000

20.000

Present equivalent of costs=20000+Present value of uniform series

Present value of uniform series

( ) ( . )
P u= 𝐴 =8000 =156803
( ) . ( . )

Present equivalent of all costs=20000+156803=176803 TL

c) Net present value-net benefit- (B-C) of the project.

B-C=192827-176803=16024 TL. Since (B-C) is larger than 0, the project is economically applicable

d) Marginal benefit (B/C) of the project

B/C=192827/176803=1.09, Since (B/C) is larger than 1, the project is economically applicable

 Benefit Cost Analysis by uniform values

Uniform equivalent of benefits = Uniform value of linearly increasing series + Uniform value of 30 years
of the uniform series of 20 years + Uniform value of scrap value

Uniform value of linearly increasing series

Ul
Pl=53806

𝑖(1 + 𝑖)
𝐴=𝑃
(1 + 𝑖) − 1
. ( . )
𝑈𝑙 = 53806 = 2745 TL
( . )

Uniform value of 30 years of the uniform series of 20 years

Fu
Uniform-Future

(1 + 𝑖) − 1
𝐹=𝐴
𝑖
( . )
𝐹 = 12000 .
=322444 TL

Future-Uniform
𝑖
𝐴=𝐹
(1 + 𝑖) − 1
.
U 20 = 322444 ( )
=6778 TL
.

Uniform value of scrap value

Us

0 30
 15000
𝑖
𝐴=𝐹
(1 + 𝑖) − 1
.
Us= 15000 ( )
= 315 TL
.

Uniform equivalent of benefits = 2745 + 6778 + 315 = 9838

Uniform equivalent of costs=8000+Uniform value of investment cost

Uniform value of investment cost

20000

Ui

Present-Unifrom
𝑖(1 + 𝑖)
𝐴=𝑃
(1 + 𝑖) − 1
. ( . )
𝑈𝑖 = 20000 = 1020 TL
( . )

Uniform equivalent of costs=8000+1020 =9020 TL

B-C=9838-9020= 818 TL
B/C=9838/9020= 1.09
 Benefit Cost Analysis by Future values

Present-Future
𝐹 = 𝑃(1 + 𝑖)
Future value of all benefits = 192827(1+0.03) 30 = 468042 TL
30
Future value of all cots = 176803 (1+0.03) = 429147 TL
B-C=38895 TL
B/C = 1.09

Present value of (B-C) = 38895/(1+0.03) 30 =16024

Uniform value of (B-C)
Future-Uniform
𝑖
𝐴=𝐹
(1 + 𝑖) − 1
.
U B-C = 38895 ( )
=818 TL
.

Method B-C B/C

Present value analysis 16024 1.09
Uniform value analysis 818 1.09
Future value analysis 38895 1.09