A bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road wil justify a two-lane road and a bridge at the present time. Because of unce regarding future use of the road, the time at which an extra two lanes will be required is currently being studied. The two-lane bridge will cost $210,000 and the four-lane bridge, it built initially, will cost $400,000. The future cost of widening a two-lane bridge to four lanes will be an extra $210,000 plus $23,000 year that widening is delayed The MARR used by the highway department is 15% per year. The following estimates have been made of the times at which the four-lane bridge will be required: Pessimistic estimate Most likely estimate Optimistic estimate 9 yours In view of these estimates, what would you recommend? List some advantages and disadvantages of this method of preparing estimates. Click the icon to view the interest and annuity table for descrete compounding when the MARR is 15% per year 4 years 5 years

A bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road wil justify a two-lane road and a bridge at the present time. Because of unce regarding future use of the road, the time at which an extra two lanes will be required is currently being studied. The two-lane bridge will cost $210,000 and the four-lane bridge, it built initially, will cost $400,000. The future cost of widening a two-lane bridge to four lanes will be an extra $210,000 plus $23,000 year that widening is delayed The MARR used by the highway department is 15% per year. The following estimates have been made of the times at which the four-lane bridge will be required: Pessimistic estimate Most likely estimate Optimistic estimate 9 yours In view of these estimates, what would you recommend? List some advantages and disadvantages of this method of preparing estimates. Click the icon to view the interest and annuity table for descrete compounding when the MARR is 15% per year 4 years 5 years

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A County Highway Department is considering either replacing or rehabilitating a bridge which crosses over a river dividing two nearby communities. Rehabilitation can be done either by force account for by contract. The cash flows associated with replacement and rehabilitation options for this bridge are shown in Table 1. Determine the most cost- effective option. Assume that interest is annually compounded at 6%. After the service life of the rehabilitated bridge is completed, the bridge will be replaced with the same cash flow as the present replacement option. Solve the problems using the annual cost method. Assume replacement in perpetuity. Cash Flows Associated with Replacement and Rehabilitation Option I: Replacement (Service life of the new bridge is 40 years) Capital Investment Initial = 45,000 15th year = 8,000 20th year = 1,500 30th year = 6,000 Annual maintenance cost = $500/year (throughout the service life) Salvage of existing bridge beams = $1,000 Option 2:…
A steel highway bridge must either be reinforced or replaced. Reinforcement would cost Rs. 6,60,000 and would make the bridge fit for an additional five years of service. If it is reinforced, it is estimated that its net salvage value would be Rs. 4,00,000 at the time it is retired from service. The new prestressed concrete bridge would cost Rs. 15,00,000 and would meet the foreseeable requirements of the next 40 years. Such a bridge would have no salvage value. It is estimated that the annual maintenance cost of the reinforced bridge would exceed that of the concrete bridge by Rs. 96,000. If the bridge is replaced by a new prestressed concrete bridge, the scrap value of the steel would exceed the demolition cost by Rs. 4,20,000. Assume that the money costs the state 10%. What would you recommend?
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A large stale university. currently facing a severe parking shortage on its campus, is considering constructing parking decks off-campus. A scheduled service composed of minibusses could pick up students at the off-campus parking deck and quickly transport them to various locations on campus. The university would charge a small fee for each shuttle ride, and the students could be quickly and economically transported to their classes. The funds raised by the shuttle would be used to pay for minibusses, which cost about $150,000 each. Each minibus has a 12-year service life with an estimated salvage value of $3.000. To operate each minibus. The following additional expenses must be considered: Item Annual Expense Driver $40,000 Maintenance $7,000 Insurance $2000 If students pay 10 cents for each ride, determine the annual ridership (i.e., the number of shuttle rides per year)…
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A small Queensland farming company is contemplating whether to invest in a new irrigation system for their farmland. Currently their crop yields 45 tonnes that can be sold at $950 per tonne. The investment is projected to boost crop yields by 10% per year for a decade. The irrigation project entails an initial investment of $100,000 and requires an annual maintenance cost of $20,000 per year. The company has already spent $50,000 on a previous project that was unsuccessful. Assume a discount rate of 4% and a tax rate of 30%. a) Find the Market Perspective result. NPV = $ IRR = % Show your calculations in your spreadsheet.
A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $600,000, the equipment costs $250,000, and $100,000 additional working capital is required. It is expected that the product will result in sales of $750,000 per year for 10 years, at which time the land can be sold for $400,000, the building for $350,000, and the equipment for $50,000. All of theworking capital would be recovered at the EOY 10. Theannual expenses for labor, materials, and all other itemsare estimated to total $475,000. If the company requiresa MARR of 15% per year on projects of comparable risk,determine if it should invest in the new product line.Use the AW method.