Three options are under review for controlling neighborhoodflooding during heavy rainstorms. All options are expected to be inplace for 50 years. The options differ both in cost and damageaverted when a heavy rain event occurs. A promise has been made tobuild one option so ‘doing nothing’ is not a political acceptablealternative. When considering weather driven damage the usualmethod is to list the level of damage in currency terms and tostate the likelihood that the damage will occur in terms offrequency that the weather event will occur. For example, a damageestimate of 500,000 for a twenty year event is interpreted that theevent will occur on average once every 20 years or has aprobability of 0.05 occurring this year so the expected damage thisyear is 0.05 times 500,000 which equals 25,000. If an interventionprevented all damage from such an event the benefit would be shownas 25,000 every year. Apply incremental benefit cost analysis tothis situation using an interest rate of 7.0% and answer thequestions that follow.

Option	A	B	C
Investment	2.4 Million	1.6 Million	4.1 Million
Annual Operating Cost	85,000	92,000	35,000
Annual Benefit	160,000	140,000	290,000
Annual Disbenefit	12,000	1,000	21,000

a. What is the B/C for option A?

b. What is the B/C for option B?

c. What is the B/C for the difference between option B andA?

d. Complete the analysis for all options and based onthe analysis, which option is the best publicinvestment?