Answered: A bridge is to be constructed now as…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road will justify a two-lane road and a bridge at the present time. Because of uncertainty 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 $220,000 and the four-lane bridge, if built initially, will cost $420,000. The future cost of widening a two-lane bridge to four lanes will be an extra $220,000 plus $26,000 for every year that widening is delayed. The MARR used by the highway department is 18% per year. The following estimates have been made of the times at which the four-lane bridge will be required:

A bridge be constructed now as part of a new road. Engineers have determined that traffic on
the new road will justify a two-lane road and a bridge at the present time. Because of uncertainty 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 $220,000 and the four-lane bridge, if built initially, will cost $420,000. The future
cost of widening a two-lane bridge to four lanes will be an extra $220,000 plus $26,000 for every year that
widening is delayed. The MARR used by the highway department is 18% 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
2 years
5 years
8 years
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 discrete compounding when the MARR is 18%
Calculate the PW value for the Pessimistic Estimate for the two-lane bridge.
pessimistic (18%) = $ thousand (Round to one decimal place.)
PW,

N123.
4
5
6
8
9
10
Single Payment
Compound
Amount
Factor
To Find F
Given P
FIP
Discrete Compounding; i = 18%
Compound
Amount
Factor
1.1800
1.3924
1.6430
1.9388
2.2878
2.6996
3.1855
3.7589
4.4355
5.2338
Present
Worth Factor
To Find P
Given F
PIF
0.8475
0.7182
0.6086
0.5158
0.4371
0.3704
0.3139
0.2660
0.2255
0.1911
To Find F
Given A
FIA
1.0000
2.1800
3.5724
5.2154
7.1542
9.4420
12.1415
15.3270
19.0859
23.5213
Uniform Series
Present
Worth Factor
To Find P
Given A
PIA
0.8475
1.5656
2.1743
2.6901
3.1272
3.4976
3.8115
4.0776
4.3030
4.4941
Sinking
Fund
Factor
To Find A
Given F
A/F
1.0000
0.4587
0.2799
0.1917
0.1398
0.1059
0.0824
0.0652
0.0524
0.0425
Capital
Recovery
Factor
To Find A
Given P
A/P
1.1800
0.6387
0.4599
0.3717
0.3198
0.2859
0.2624
0.2452
0.2324
0.2225

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