- 10 Marks
PSAF – Nov 2016 – L2 – Q6b – Government Revenue
Requires calculation and comparison of benefit/cost and net benefit/cost ratios for five local government projects to advise on project selection.
Question
The following estimated costs and benefits relate to FIVE different divisible projects of Eleweran Local Government. The local government has budgeted the sum of N100,000,000 to undertake the following projects:
| Project | A (N’000) | B (N’000) | C (N’000) | D (N’000) | E (N’000) |
|---|---|---|---|---|---|
| Estimated Costs of Investment | 20,000 | 40,000 | 24,000 | 48,000 | 60,000 |
| Estimated Benefits | 50,000 | 44,000 | 40,000 | 52,000 | 72,000 |
You are required to:
i. Calculate the benefit/cost ratio of each of the five projects. (1 1/4 Marks)
ii. Compute the net benefit/cost ratio of each project. (3 3/4 Marks)
iii. Compare the results in (i) and (ii) and advise the chairman of the local government on the project to be undertaken. (5 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Benefit/Cost Ratio, Local Government Projects, Net Benefit, Project Investment
- Level: Level 2
- Topic: Government Expenditure, Government Revenue
- Series: NOV 2016
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