Based on estimates the data for 2 types of bridges with different lives are as follows. If the minimum attractive rate of return is 9%, determine which project is more desirable using Annual Cost Method & Rate of Return Method.

Based on estimates the data for 2 types of bridges with different lives are as follows. If the minimum attractive rate of return is 9%, determine which project is more desirable using Annual Cost Method & Rate of Return Method.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Based on estimates the data for 2 types of bridges with different lives are as follows. If the minimum attractive

rate of return is 9%, determine which project is more desirable using Annual Cost Method & Rate of Return Method.

Timber Bridge Steel Bridge
First Cost
P500k
P1.4M
Salvage Value
20k
100k
Life in yrs
12
36
Annual
maintenance
60k
25k

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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