Suppose That the Cost of Installing an Overhead Pedestrian Walkway

question 114

Multiple Choice

Suppose that the cost of installing an overhead pedestrian walkway in a college town is $80,000.The walkway is expected to reduce the risk of fatality by 0.8 percent,and the cost of a human life is estimated at $10 million.The town should

• A) install the walkway because the estimated benefit is twice the cost.
• B) install the walkway because the estimated benefit equals the cost.
• C) not install the walkway,since the cost is twice the estimated benefit.
• D) install the walkway,since the cost of even a single life is too great not to take action.

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Definitions:

Pension Expense

The cost recognized by an employer for maintaining a defined benefit pension plan for its employees, encompassing various components such as service cost and interest cost.

Actuarially Determined

Calculations made based on actuarial methods and assumptions, often used in determining pension liabilities and insurance premiums.

Pension Benefit Obligation

The reported estimate of the total amount due to employees in relation to pension benefits as per the terms of the pension plan.

Interest Cost

The total amount of interest that will be incurred over the lifetime of a debt.