What does a Benefit-Investment Ratio (BIR) of 1.52 indicate?

What does a Benefit-Investment Ratio (BIR) of 1.52 indicate?

• A. A BIR of 1.52 means a $1.52 of benefit for every $1 of cost.
• B. A BIR of 1.52 means $1.52 of cost for every $1 of benefit.
• C. A BIR of 1.52 means a $1.52 of revenue for every $1 of cost.
• D. A BIR of 1.52 means the project has no net benefit.

Answer: (A)

Benefit-Investment Ratio shows how much benefit you get for each dollar invested. A BIR of 1.52 means the present value of benefits is 1.52 times the present value of costs. In practical terms, for every dollar spent, you would receive $1.52 in benefits. The project therefore yields a 52% greater benefit than its cost, assuming the same discounting method was used to compute the values. This is why it indicates a worthwhile project (BIR > 1). It does not describe cost per benefit, nor revenue per cost, nor claim no net benefit, so the interpretation that aligns with 1.52 benefits per 1 dollar of cost is the correct one.

Benefit-Investment Ratio shows how much benefit you get for each dollar invested. A BIR of 1.52 means the present value of benefits is 1.52 times the present value of costs. In practical terms, for every dollar spent, you would receive $1.52 in benefits. The project therefore yields a 52% greater benefit than its cost, assuming the same discounting method was used to compute the values. This is why it indicates a worthwhile project (BIR > 1). It does not describe cost per benefit, nor revenue per cost, nor claim no net benefit, so the interpretation that aligns with 1.52 benefits per 1 dollar of cost is the correct one.