Problem 40: A local city must make an assessment about the feasibility of repairing a bridge.The estimated useful life of the bridge is 25 years. The MARR is 7%. The relevant costestimates are found in the table below in thousands of dollars. What is the B/C ratio of makingrepairs most nearly?(A) 1.20(B) 1.60(C) 1.90(D) 2.20Initial Cost (K$)Annual cost (K$); Year 1-15Annual Cost (K$); Year 15-25Salvage Value (K$)Existing011156Repair804521

B/C ratio is one of the method for capital budgeting based on the time value of money used in long…

Answered: Problem 40: A local city must make an…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The city of Bloomington is deciding if they are going to be able to justify an additional street light. The cost of the light to install is $14,000. City officials believe it will reduce the death rate at that intersection from 1.0% to 0.6%. Our guideline for valuing human life is $8M per person. What is the net of this cost benefit proposal? A. 32,000 B. 18,000 C. (18,000) D. (32,000)
2. B/C RATIO The city council of Morristown is considering the purchase of one new fire truck. The options are Truck X and Truck Y. the appropriate financial data are as follows: Truck X Truck Y $50,000 $64,000 $5,000 Annual Reduction in fire damage $20,000 | $22,000 Capital investment Annual Maintenance expenses $6,000 Life in years 6 6 The purchase is to be financed by money borrowed at 10%. Which truck is recommended using B/C ratio method.
V3. A school district considers two alternative plans for an athletic stadium. An engineer makes the following cost estimates for each: Concrete Bleachers. First cost, $350,000. Life is 90 years. Annual maintenance cost $2,500. Wooden Bleachers on Earth Fill. First cost, $200,000. Life is 90 years. Painting cost $12,000 every 10 years. New seats costs $40,000 every 15 years and new bleachers cost $100,000 every 30 years (don’t include replacing the bleachers in year 90). Compare equivalent uniform annual costs for a 90-year period using i = 7% compounded annually. (Which one would you choose?)
Consider the relative costs of a timber pedestrian bridge and a steel one; their initial capital costs, annual OMR costs and useful lives are given below: Initial capital cost Annual OMR cost Life span Timber Bridge $500,000 $30,000 15 years Steel Bridge $700,000 $5000 30 years Find the alternative of the least overall costs (use i = 8%). Use both present worth and annual worth methods.
A city needs a new pedestrian bridge over a local stream. The city uses an interest rate of 5%, and the project life is 30 years. The following data (in millions of dollars) summarizes the bids that were received. Bid A $4.20 |Bid B Construction materials costs $6.20 Construction labor costs 0.60 0.70 Construction overhead costs 0.35 0.03 Initial administrative and legal costs|0.60 0.01 D- 94 Annual operating costs Annual revenue from operation 0.075 Unknown 0.40 0.25 0.05 Other annual benefits to the city 0.22 What would the annual revenue of Bid A have to be for the two projects to be equivalent? Choose the closest value. (a) 0.10 (b) 0.20 (c) 0.30 (d) 0.40

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