A toll bridge across the Mississippi River is being considered as a replacement for the current I-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B–C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $17,500,000, and $325,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fifth year of its 30-year projected life at a cost of $1,250,000 per occurrence (no resurfacing cost in year 30). Revenues generated from the toll are anticipated to be $2,500,000 in its first year of operation, with a projected annual rate of increase of 2.25 % per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 30 years and aMARR of 10% per year, should the toll bridge be constructed ?
A toll bridge across the Mississippi River is being considered as a replacement for the current I-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B–C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $17,500,000, and $325,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fifth year of its 30-year projected life at a cost of $1,250,000 per occurrence (no resurfacing cost in year 30). Revenues generated from the toll are anticipated to be $2,500,000 in its first year of operation, with a projected annual rate of increase of 2.25 % per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 30 years and aMARR of 10% per year, should the toll bridge be constructed ?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
At this part of the computation (see image)
how did you end up with the number 11.4619, I cannot seem to figure out how or what I should type into the calculator to get to 11.4619, can you help me?
![Revenue – (P/F,10%,30)(F/P,2.25%,30)
PV (benefits) =
MARR – Annual rate increase
S2,500,000[1-(P/F,10%,30)(F/P,2.25%,30)]
0.10 –0.0225
= $2,500,000×11.4619](https://content.bartleby.com/qna-images/question/8027f48e-47f3-470a-9b38-7716da02e197/b71644dd-7bcd-4f49-9f14-77eeefe97567/6rcovmg_processed.jpeg)
by Bartleby Expert
