A bridge design firm is performing an economic analysis of two mutually exclusive designs for ahighway overpass. The steel girder option has an initial cost of $2.25 million, and the concreteoption has an initial cost of $2.59 million. Every 25 years, the steel bridge must be painted at a costof $690,000, and all other maintenance costs are the same for both options. The steel bridge isexpected to last 50 years, and concrete bridge is expected to last 75 years. Based on the shortestacceptable analysis period, determine the present worth of costs for the best option using aninterest rate of 7%. Express your answer in $ to the nearest $10,000.

Answered: A bridge design firm is performing an…

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 bridge design firm is performing an economic analysis of two mutually exclusive designs for a
highway overpass. The steel girder option has an initial cost of $2.25 million, and the concrete
option has an initial cost of $2.59 million. Every 25 years, the steel bridge must be painted at a cost
of $690,000, and all other maintenance costs are the same for both options. The steel bridge is
expected to last 50 years, and concrete bridge is expected to last 75 years. Based on the shortest
acceptable analysis period, determine the present worth of costs for the best option using an
interest rate of 7%. Express your answer in $ to the nearest $10,000.

Expert Solution

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The annual cost of acquiring, running, and sustaining an asset over the course of its life is known as the Equivalent Annual Cost. EAC is frequently used by businesses to make capital budgeting decisions since it enables them to evaluate the cost-effectiveness of different assets with different lifespans.

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