A proposal is being considered to improve an existing roadway condition by resurfacing the road to reduce transportation costs. The cost of the project is $1,505,000. Present annual transportation cost for all traffic amounts to $1,955,000 per year and would continue if no improvement is made. After the improvement, annual transportation costs are estimated to be $1,700,000. Assume the life of the pavement design is 20 years and the minimum attractive rate of return (MARR) is 10.5 %. Evaluate this proposal by using the net present worth, benefit-to-cost ratio, and internal rate of return methods. Assume costs appear at the beginning of each year while benefits appear at the end of each year.
A proposal is being considered to improve an existing roadway condition by resurfacing the road to reduce transportation costs. The cost of the project is $1,505,000. Present annual transportation cost for all traffic amounts to $1,955,000 per year and would continue if no improvement is made. After the improvement, annual transportation costs are estimated to be $1,700,000. Assume the life of the pavement design is 20 years and the minimum attractive
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