Question

During an assessment of economic viability of the project, the ratio of estimated cost of project to the annual savings is called

a. net present value (npv)
b. pay-back period (pbp)
c. return on investment (roi)
d. benefit-cost ratio (bcr)

Answer 1

The correct option is d. The benefit-cost ratio (BCR) measures the ratio of the estimated cost of a project to the annual savings. It helps assess the economic viability of a project by comparing costs with expected benefits.

Step-by-step explanation:

The ratio of the estimated cost of a project to the annual savings is called the benefit-cost ratio (BCR). This ratio helps assess the economic viability of a project by comparing the costs to the expected benefits.

For example, if a project has an estimated cost of $100,000 and is expected to generate annual savings of $20,000, the BCR would be $5 ($100,000/$20,000). In this case, the BCR represents how many times the annual savings can cover the cost of the project. A higher BCR indicates more favorable economic viability.