It is proposed to reconstruct a 10-mile 4-lane highway with flexible pavements in Year 2021. The initial cost (per lane-mile) would be $200,000 and it would have zero salvage value at the end of its service life of 25 years. The annual maintenance cost would be $2,000 per lane-mile, with a 5 percent increase annually. Assume an annual effective discount rate of 4%, calculate the net present agency costs.

It is proposed to reconstruct a 10-mile 4-lane highway with flexible pavements in Year 2021. The initial cost (per lane-mile) would be $200,000 and it would have zero salvage value at the end of its service life of 25 years. The annual maintenance cost would be $2,000 per lane-mile, with a 5 percent increase annually. Assume an annual effective discount rate of 4%, calculate the net present agency costs.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 3E

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