Question

A new network's hardware has a usable life of 4 years. It costs $125,000 but will save $25,000 a year in reduced maintenance costs.

What is the cost benefit ratio?

Answer 1

The cost benefit ratio is 0.8, indicating a benefit of $0.80 for every $1 spent on the network's hardware.

Step-by-step explanation:

The cost benefit ratio is calculated by dividing the total benefits by the total costs. In this case, the total cost of the network's hardware is $125,000. The total benefits over the 4-year life of the network are $25,000 per year, which amounts to a total of $100,000 in savings. To calculate the cost benefit ratio, divide the total benefits ($100,000) by the total costs ($125,000):

Cost Benefit Ratio = Total Benefits / Total Costs

Cost Benefit Ratio = $100,000 / $125,000

Cost Benefit Ratio = 0.8

The cost benefit ratio is 0.8, which means that for every $1 spent on the network's hardware, there is a benefit of $0.80.