The tunnel which should be constructed.
Answer to Problem 27P
The half capacity tunnel should be constructed as the total effective cost for half capacity tunnel is
Explanation of Solution
Given:
The table for given data is shown below.
Year | Particulars | Full capacity tunnel | Half capacity tunnel |
0 | Capital cost | ||
Beginning of |
Capital cost for |
||
10 | Repair | ||
20 | Repair | ||
30 | Repair | ||
40 | Repair |
Table (1).
Concept used:
Write the expression for total effective cost.
Here, capital cost is
Calculations:
Calculate the total effective cost for full capacity tunnel.
Substitute
Calculate the total effective cost for half capacity tunnel.
Substitute
Conclusion:
Thus, the half capacity tunnel should be constructed as the total effective cost for half capacity tunnel is
Want to see more full solutions like this?
Chapter 16 Solutions
ENGR.ECONOMIC ANALYSIS
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education