Benefit/Cost Ratio Assignment

Benefit/Cost Ratio Assignment

A non-profit has begun a new program to help people looking for employment. The CFO has asked you to calculate the Benefit/Cost (B/C) ratio for the program.

The first cost of the program is $425,013. The program has annual expenses of $118,454 which are estimated to increase by $19,771 each year.

To help fund the program, the non-profit will receive a 5-year grant of $171,566 per year, with the first payment awarded at the end of year 1 and the last payment received at the end of year 5. In year 9, the program anticipates receiving another grant. The second grant will pay the non- profit $308,225 a year for the remainder of the life of the program, with the non-profit receiving the first payment at the end of year 9.

The program will have a lifespan of 13 years.

Use a nominal annual interest rate of 7%, compounded annually to make the B/C ratio calculation.

Enter your answer as: 1.23

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