A highway bridge is being considered for replacement. The new bridge would cost $X and would last for 24 years. Annual maintenance costs for the new bridge are estimated to be $24,000. People will be charged a toll of $0.29 per car to use the new bridge. Annual car traffic is estimated at 390,000 cars. The cost of collecting the toll consists of annual salaries for six collectors at $10,000 per collector. The existing bridge can be refurbished for $1,300,000 and would need to be replaced in 24 years. There would be additional refurbishing costs of $75,000 every five years and regular annual maintenance costs of $22,000 for the existing bridge. There would be no toll to use the refurbished bridge. If MARR is 12% per year, what is the maximum acceptable cost (X) of the new bridge?

A highway bridge is being considered for replacement. The new bridge would cost $X and would last for 24 years. Annual maintenance costs for the new bridge are estimated to be $24,000. People will be charged a toll of $0.29 per car to use the new bridge. Annual car traffic is estimated at 390,000 cars. The cost of collecting the toll consists of annual salaries for six collectors at $10,000 per collector. The existing bridge can be refurbished for $1,300,000 and would need to be replaced in 24 years. There would be additional refurbishing costs of $75,000 every five years and regular annual maintenance costs of $22,000 for the existing bridge. There would be no toll to use the refurbished bridge. If MARR is 12% per year, what is the maximum acceptable cost (X) of the new bridge?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A highway bridge is being considered for replacement. The new bridge would cost $X and would last for 24 years. Annual maintenance costs for the new bridge are
estimated to be $24,000. People will be charged a toll of $0.29 per car to use the new bridge. Annual car traffic is estimated at 390,000 cars. The cost of collecting the
toll consists of annual salaries for six collectors at $10,000 per collector. The existing bridge can be refurbished for $1,300,000 and would need to be replaced in 24
years. There would be additional refurbishing costs of $75,000 every five years and regular annual maintenance costs of $22,000 for the existing bridge. There would
be no toll to use the refurbished bridge. If MARR is 12% per year, what is the maximum acceptable cost (X) of the new bridge?

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