A company has $516 in inventory, $1,777 in net fixed assets, $204 in accounts receivable, $77 in cash, and $226 in accounts payable. What are the company's total current assets?

A) DO nothing is selected ( BCR for both alternatives ≤ 1 )

B) Do nothing is to be selected ( government BCR fr both alternatives ≤ 1 )

Explanation:

A) using the benefit-cost ratio to determine which alternative to be chosen

Benefit cost ratio = PW of benefits / ( first cost + PW of O&M costs )

Benefit cost ratio for Alternative ( A )

= (2.1 (user benefits) * P/A ( interest rate , life of alternative ) / ( 6.9 + 0.75 * P/A ( interest rate, life of alternative )

= ( 2.1 * P/A ( 8% , 5 ) / ( 6.9 + 0.75 * P/A ( 8%,5 )

= (2.1 * 3.9927) / ( 6.9 + 0.75 * 3.9927 )

= 8.38 ( approximately ) / 9.89 ( approximately ) = 0.85

Benefit cost  ratio for Alternative ( B )

= (2.6 ( user benefits ) * P/A (8%,5)  / ( 9.9 + 0.825 * P/A(8%,5)

= ( 2.6 * 3.9927 ) / ( 9.9 + 0.825 * 3.9927 )

= 10.38 / 9.9 + 3.29

= 0.79  

note : P/A ( 8%,5 ) value is gotten from the P/A factor table

B) using public/government version of the B/C ratio

Government BCR = ( PW of benefits - PW of dis-benefits ) / ( first cost + PW of O&M costs )

For Alternative A = ( 2.1 - 1.2 )* P/A(8%,5) / ( 6.9 + 0.75 * P/A(8%,5) )

= (0.9 * 3.9927) / ( 6.9 + 2.99)

= 3.59 / 9.89 = 0.36

For Alternative B = ( 2.6 -2.1 ) * P/A ( 8%,5) / ( 9.9 + 0.825 * P/A(8%,5) )

= ( 0.5 * 3.9927) / ( 9.9 + 3.29 )

= 0.15