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Discussion

Benefits and costs in the ratio must both be expressed

  • A.at different discount rates
  • B.as present worths or both as annual worths
  • C.one as a present worth and the other annually
  • D.in undiscounted totals

Answer: B

The ratio is unchanged whether both are annualised or both discounted to the present, since the same capital recovery factor divides out of numerator and denominator alike. Mixing the two bases produces a meaningless number.

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