Reference no: EM131687359

Two design alternatives A and B have the following cash flows. Each alternative has 20-year life at a 8% interest rate.

Alternative A Alternative B 

Initial Cost $700,000  $950,000

Annual Benefits $80,000 $120,000

Annual Operating Cost $20,000 $30,000 

Using incremental B/C ratio to select the best alternative. Which of the following statements is TRUE?

A.Incremental B/C ratio is 0.89 and Alternative A should be selected.

B.Incremental B/C ratio is 0.89 and Alternative B should be selected.

C.Incremental B/C ratio is 1.13 and Alternative B should be selected.

D.Incremental B/C ratio is 1.13 and Alternative A should be selected.