What does BCR stand for in cost-benefit analysis?

Benefit-Cost Ratio

True or False: A project with BCR = 0.85 should be approved.

False. BCR must be ≥ 1.0 for project approval.

Fill in the blank: BCR = PW(Benefits) / _____

PW(Costs)

What are negative consequences of a project called in CBA?
A) Costs
B) Disbenefits
C) Liabilities
D) Externalities

B) Disbenefits

Why are all cash flows converted to present worth?

To account for time value of money differences.

What is the minimum BCR required for project acceptance?

1.0

True or False: Disbenefits are added to project costs.

False. Disbenefits are subtracted from benefits.

What type of analysis is required for mutually exclusive alternatives?

Incremental benefit-cost analysis

Fill in the blank: Modified BCR = (Benefits - O&M) / _____

Initial Investment

Which discount rate is typically used for public projects?
A) MARR
B) Social discount rate
C) Market rate
D) Prime rate

B) Social discount rate

What happens when ΔBCR between alternatives equals 1.5?

Select the higher-cost alternative (economically justified increment).

True or False: Intangible benefits cannot be included in CBA.

False. They can be monetized using valuation techniques.

What does willingness-to-pay (WTP) help determine?

Monetary value of intangible benefits

For independent projects with limited budget, select projects with:
A) Highest benefits
B) Lowest costs
C) Highest BCR
D) Shortest payback

C) Highest BCR

Why should alternatives be ordered by increasing cost in incremental analysis?

To ensure proper comparison sequence from lowest defendable alternative.

What is the BCR if PW(Benefits) = $500K and PW(Costs) = $400K?

1.25

True or False: Higher BCR always means better project selection.

False. Must use incremental analysis for mutually exclusive alternatives.

Fill in the blank: (1 + i_nominal) = (1 + i_real)(1 + _____)

Inflation rate

What analysis evaluates how BCR changes with variable adjustments?
A) Incremental analysis
B) Sensitivity analysis
C) Risk analysis
D) Scenario analysis

B) Sensitivity analysis

When should the do-nothing alternative be included?

When maintaining current conditions is a viable option.

What is the primary difference between public and private project analysis?

Public projects consider societal benefits; private focus on profitability.

True or False: Operating costs should use same discount rate as benefits.

True. Consistent discounting maintains proper time value relationships.

If Alternative A has BCR=1.2 and Alternative B has BCR=1.8, which should be selected?

Cannot determine without incremental analysis between alternatives.

What does revealed preference method estimate?
A) Direct costs
B) Intangible benefit values
C) Discount rates
D) Project life

B) Intangible benefit values

Fill in the blank: For project life of 25 years at 6%, use factor _____ to find PW.

(P/A, 6%, 25)

What should be done if both incremental BCRs in a three-alternative comparison exceed 1.0?

Select the highest-cost alternative (most incremental investment justified).

True or False: Toll revenue should always be treated as project benefits.

False. Often treated as cost recovery rather than societal benefit.

Which approach values safety improvements using accepted statistical values?
A) WTP studies
B) Revealed preference
C) Statistical life value
D) Cost alternatives

C) Statistical life value

What is the decision rule when comparing challenger to current defender?

Accept challenger if incremental BCR ≥ 1.0.