A steel pedestrian overpass must either be reinforced or replaced. Reinforcement would cost $25,000 and would make the overpass adequate for an additional 6 years of service. If the overpass is torn down now, the scrap value of the steel would exceed the removal cost by $15,000. If it is reinforced, it is estimated that its net salvage (market) value would be $18,000 at the time it is retired from service. A new pre-stressed concrete overpass would cost $140,000 and would meet the foreseeable requirements of the next 40 years. Such a design would have no net scrap or MV. It is estimated that the annual expenses of the reinforced overpass would exceed those of the concrete overpass by $3,200. Assume that money costs the state 8% per year and that the state pays no taxes. What would you recommend?
. A steel pedestrian overpass must either be
reinforced or replaced. Reinforcement would cost
$25,000 and would make the overpass adequate for an
additional 6 years of service. If the overpass is torn
down now, the scrap value of the steel would exceed
the removal cost by $15,000. If it is reinforced, it is
estimated that its net salvage (market) value would be
$18,000 at the time it is retired from service. A new
pre-stressed concrete overpass would cost $140,000 and
would meet the foreseeable requirements of the next
40 years. Such a design would have no net scrap or MV.
It is estimated that the annual expenses of the reinforced
overpass would exceed those of the concrete overpass
by $3,200. Assume that money costs the state 8% per
year and that the state pays no taxes. What would you
recommend?
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