Two relatively inexpensive alternatives are available for reducing potential earthquake damage at a top secret government research site. The cash flow estimates for each alternative are given below. At an interest rate of 8% per year, use the B/C ratio method to determine which one should be selected. Use a 20-year study period, and assume the damage costs would occur in the middle of the study period, that is, in year 10. Alternative 1 Alternative 2
Initial cost, $ 600,000 1,100,000
Annual maintenance, $/year 50,000 70,000
Potential damage costs, $950,000 250,000