CSP Practice Test 12

A press-guarding retrofit costs $150,000 to install plus $10,000 per year to maintain. It is expected to cut the plant's expected amputations from 0.40 to 0.05 per year; each amputation costs an average of $250,000 in direct and indirect costs. Over a 3-year evaluation period, ignoring the time value of money, and using

$B/C=\frac{\text{total benefits}}{\text{total costs}}$

where the benefit is the reduction in expected loss (expected loss = frequency × severity), what is the benefit-cost ratio?