Microsurfacing is part of a pavement restoration and maintenance program that seals the surface of a street that has minor cracking to prevent water from penetrating into the base material. The annual cost of the equipment (truck, tank, valves, etc.) is $109,000 per year and the material cost is $2.75 per square yard. Alternatively, regular street resurfacing requires equipment that has a first cost of $225,000 with a 15-year life and no salvage value. The variable cost for regular resurfacing is $13 per square yard. At an interest rate of 8% per year, how many square yards per year must be resurfaced for the two methods to break even?
Microsurfacing is part of a pavement restoration and maintenance program that seals the surface of a street that has minor cracking to prevent water from penetrating into the base material. The annual cost of the equipment (truck, tank, valves, etc.) is $109,000 per year and the material cost is $2.75 per square yard. Alternatively, regular street resurfacing requires equipment that has a first cost of $225,000 with a 15-year life and no salvage value. The variable cost for regular resurfacing is $13 per square yard. At an interest rate of 8% per year, how many square yards per year must be resurfaced for the two methods to break even?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Question
Microsurfacing is part of a pavement restoration
and maintenance program that seals the surface
of a street that has minor cracking to prevent
water from penetrating into the base material.
The annual cost of the equipment (truck, tank,
valves, etc.) is $109,000 per year and the material
cost is $2.75 per square yard. Alternatively, regular
street resurfacing requires equipment that has
a first cost of $225,000 with a 15-year life and no
salvage value. The variable cost for regular resurfacing
is $13 per square yard. At an interest rate
of 8% per year, how many square yards per year
must be resurfaced for the two methods to
break even?
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