In building a highway, the district engineer is faced with the alternatives of building a 4-lane underpass that would take care of all future needs of building, and a two - lane underpass now and a second 2-lane underpass 20 years later. The four - lane underpass would costs P400, 000 and has a maintenance costs of P10, 000 per year during the 40 years it is expected an underpass will be needed. The 2-lane underpass costs P270, 000 each and each would have maintenance costs of P8, 000 per year. If financing costs are 5%, which alternative should be adopted, compute the difference of its equivalent present worth. Assume zero salvage value for each alternative at the end of 40 years. Use present worth method |

In building a highway, the district engineer is faced with the alternatives of building a 4-lane underpass that would take care of all future needs of building, and a two - lane underpass now and a second 2-lane underpass 20 years later. The four - lane underpass would costs P400, 000 and has a maintenance costs of P10, 000 per year during the 40 years it is expected an underpass will be needed. The 2-lane underpass costs P270, 000 each and each would have maintenance costs of P8, 000 per year. If financing costs are 5%, which alternative should be adopted, compute the difference of its equivalent present worth. Assume zero salvage value for each alternative at the end of 40 years. Use present worth 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

In building a highway, the district engineer is faced with the alternatives
of building a 4-lane underpass that would take care of all future needs of
building, and a two – lane underpass now and a second 2-lane underpass
20 years later. The four - lane underpass would costs P400, 000 and has
a maintenance costs of P10, 000 per year during the 40 years it is expected
an underpass will be needed. The 2-lane underpass costs P270, 000 each
and each would have maintenance costs of P8, 000 per year. If financing
costs are 5%, which alternative should be adopted, compute the difference
of its equivalent present worth. Assume zero salvage value for each
alternative at the end of 40 years. Use present worth method

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