Suppose a municipality has excess funds to invest. It is choosing between the same investments described in the previous example. Government agencies often compute benefit-cost ratios to decide which investment to pursue. Which is best in this case?

Open the portfolio SASHELP.INVSAMP.NVST and compare the investments.

To compute the benefit-cost ratios, follow these steps:

1. Select all five investments.

2. Select Analyze Benefit-Cost Ratio.

3. Enter 01JAN1996 for the Date.

4. Enter 9 for Constant MARR.

5. Click Create Benefit-Cost Ratio Summary to fill the Benefit-Cost Ratio Summary area.

The results displayed in Figure 55.5 indicate that investments 2, 4, and 5 have ratios greater than 1. Therefore, each is profitable with a MARR of 9%.

Figure 55.5 Performing a Benefit-Cost Ratio Analysis