A highway bridge is being considered for replacement. The new bridge wouldcost $X and would last for 20 years. Annual maintenance costs for the new bridge areestimated to be $24,000. People will be charged a toll of $0.25 per car to use the newbridge. Annual car traffic is estimated at 400,000 cars. The cost of collecting the tollconsists of annual salaries for five collectors at $10,000 per collector. The existing bridgecan be refurbished for $1,600,000 and would need to be replaced in 20 years. There wouldbe additional refurbishing costs of $70,000 every five years and regular annualmaintenance costs of $20,000 for the existing bridge. There would be no toll to use therefurbished bridge. If MARR is 12% per year, what is the maximum acceptable cost (X) ofthe new bridge?

Step 1:2.Workings:Cost of refurbishing existing BridgePresent Value of Cash Outflow = Refurbishing…

Answered: A highway bridge is being considered…

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 is to be constructed now as part of a new road. Engineers have determined that current traffic volume on the new road will justify a two-lane road and a bridge at the present time. Because of the uncertainty regarding future traffic, the time at which the additional two lanes will be required is currently being studied. Two alternatives are being considered. Alternative 1 - One-stage construction: Build a four lane bridge right now for $397,000. Alternative 2 - Two-stage construction: Start with a two-lane bridge now for $190,000 and widen to four lanes later when traffic justifies. The future cost of widening the bridge to four-lanes at that time will be $190,000 plus an extra $23,000 for every year that widening is delayed. For example, if future widening is done at the end of year 7, the cost of widening at that time will be equal to $190,000 + 7x($23,000) = $351,000. The following estimates have been made of when widening to a four-lane bridge will be required: Pessimistic…
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A bridge is to be constructed now as part of a new road. Engineers have determined that current traffic volume on the new road will justify a two-lane road and a bridge at the present time. Because of the uncertainty regarding future traffic, the time at which the additional two lanes will be required is currently being studied. Two alternatives are being considered. Alternative 1 - One-stage construction: Build a four lane bridge right now for $360,000. Alternative 2 - Two-stage construction: Start with a two-lane bridge now for $170,000 and widen to four lanes later when traffic justifies. The future cost of widening the bridge to four-lanes at that time will be $170,000 plus an extra $23,000 for every year that widening is delayed. For example, if future widening is done at the end of year 7, the cost of widening at that time will be equal to $170,000 + 7x($23,000) = $331,000. The following estimates have been made of when widening to a four-lane bridge will be required: Pessimistic…
EVALUATE THE REQUIRED VALUE BASED ON THE GIVEN STANDARD NOTATION BD20,500 (A/P, 9%, 7) 2. BD590 (F/A, 5%, 10)
The following data applies for example problems 8.1 through 8.3. A company is considering the purchase of either machine A or machine B. machine A machine B initial cost $80,000 20 years $20,000 $18,000 per year $100,000 25 years $25,000 $15,000 per year for the first 15 years $20,000 per year for the next 10 years estimated life salvage value other costs The interest rate is 10%, and all cash flows may be treated as end-of-year cash flows. Assume that equivalent annual cost is the value of the constant annuity equal to the total cost of a project. The equivalent annual cost of machine B is most nearly (A) $21,000 (B) $21,500 (C) $23,000 (D) $26,500
A factory manager is considering the purchase of one of the following two production equipment. Cash flow estimates for equipment A are in year-zero dollars while those of equipment B are in actual dollars. Equipment A (year-zero $) Initial investment Net annual revenue $9,800 $3,000 Market value at end of useful life Useful life, years $0 12 Equipment B (actual $) $11,200 $4,000 $0 12 The manager uses a market interest rate of 12% per year. If inflation rate is expected to average 7.69% per year over the next several years, determine the PW of each equipment. 1. The PW of Equipment A is A. $18,355 B. $13,176 ○ C. $12,800 ○ D. $8,783 2. The PW of Equipment B is ○ A. $15,200 B. $26,340 ○ C. $13,577 OD. $19,435
Your company is planning to expand by taking over the next-door manufacturing facility. You are faced with a buy-versus-lease option. The purchase price is $1.5 million, while you can lease it for $270,000 per year for 10 years. If purchased, it can be sold for 40% of its original price at the end of its 10 years life. In either case the annual income is estimated to be $1.2 million and the annual operating cost would be $300,000. Your company pays 38% combined income tax and the after-tax minimum attractive rate of return (MARR) is 10%. Assuming lease payments are due at the end of the year and using a straight-line depreciation over the 10 years life with full first year depreciation, determine: a. The EUAW = EUAB-EUAC for each option with MARR = 10%. Should the facility be purchased or leased? b. The break-even rate of return of purchase versus lease, i.e. ROR at which (EUAB – EUAC) purchase = (EUAB - EUAC) lease
11-8. The Ford Motor Company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment (study) period is four years, and MARR is 12% per year. Data for the fixture costs of the systems are as follows. Alternatives В Annual savings MV (after 4 years) Capital investment $12,000 $15,800 $8,000 $4,000 $5,200 $3,000 $3,500 $1,500 $3,000 IRR 19.2% 18% 23% Plot the AW of each alternative against MARR as the MARR varies across this range: 4%, 8%, 12%, 16%, and 20%. What can you generalize about the range of the MARR for which each alternative is preferred? (11.2)
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4
Tower City aims to construct a new bypass between two main routes that will reduce commuter travel time. The route will cost $15 million and will save 17,500 people $100 per year in petrol costs. The path will be paved. Every year, at a cost of $7,500, the surface must be refinished. The road will be in use for the next 20 years. Determine if Tower City should construct the road. Money has an interest rate of 8%(ɛ = interest rate) . Note: Show final answer in two decimal places and show complete solution with cash flow a. The Net Present Worth of this project = $ Blank 1 b. The IRR of this project = Blank 2% c. The ERR of this project = Blank 3% %3D d. Should the city build the bypass road? (type only Yes or No) = Blank 4 %3D
The city of Oakmont is interested in developing some lake front property into a sports park (picnic facilities, boat docks, swimming area, etc.). A consultant has estimated that the city would need to invest $3 million in this project. In return, the developed property would return $500,000 per year to the city through increased tax revenues and recreational benefits to the public. What would the life of this project need to be in order to be cost-beneficial to the city? The interest rate on municipal bonds is 4% per year. E Click the icon to view the interest and annuity table for discrete compounding when i= 4% per year. The life of the project needs to be at least years in order to be cost-beneficial to the city. (Round up to the nearest whole number.)

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