A highway department must select one of two pavement repair options for a 10-mile section of a four-lane highway. The analysis period is 8 years, and the interest rate is 8%. Option 1 Option2 Initial cost $5,300,000 $3,000,000 Annual cost 300,000 400,000 Lifetime 8 years 4 years a) Form the cash flow table for the alternatives and the incremental investment, using standard sign convention. b) Using present worth analysis, find the best repair option. c) Using annual cash flow analysis, find the best repair option. d) Using the incremental rate of return analysis, find the best repair option. e) Using incremental benefit-cost ratio analysis, find the best repair option

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
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A highway department must select one of two pavement repair options for a 10-mile section of a four-lane highway. The analysis period is 8 years, and the interest rate is 8%. Option 1 Option2 Initial cost $5,300,000 $3,000,000 Annual cost 300,000 400,000 Lifetime 8 years 4 years a) Form the cash flow table for the alternatives and the incremental investment, using standard sign convention. b) Using present worth analysis, find the best repair option. c) Using annual cash flow analysis, find the best repair option. d) Using the incremental rate of return analysis, find the best repair option. e) Using incremental benefit-cost ratio analysis, find the best repair option
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