Project: The streets and roads maintained by the government have not had an adequate maintenance program. The Public Works Department’s Civil Engineers have recommended the establishment of a dedicated team for the rapid and efficient accomplishment of the repair of potholes and other paving failures. The accomplishment of this recommendation is expected to require the services of a full-time, dedicated crew of four (4) field personnel: one (1) Crew Foreman and three (3) Maintenance Workers. The efforts of this group will be the constant execution of a job-order report from the Public Works Department’s current Road Inventory computer software’s Repair Report List. They will accomplish their scheduled work using an automated asphalt patching system for the repair of potholes in major roadways that will be purchased for this purpose. Purchase price estimated @ $175,000. The purchase price includes training of three (3) individuals in the operation and maintenance of the equipment. The cost of the crew’s year 1 annual salaries and benefits are expected to conform to the following schedule:Position Individual Cost Total CostSupervisor 1 (1) $51,000 $51,000Maintenance Worker II (3) $38,500 115,500Total: $166,500 Note that salary & benefit costs can be expected to increase approximately 2.5% per year.Presently, the annual budget for maintaining and refurbishing failing roadways is $750,000. This amount has historically (over the most recent 10 years) increased by an average 8% annually. The Public Works Engineers estimate that the proposed maintenance program will reduce that budgetary item’s cost annually by the following proportions: Progr CostYear Reduction1 7%2 10%3 10%4 10%5 8%6 6%7 4%8 4%9 3%10 2% The Public Works Engineers also estimate program operating costs for materials, equipment maintenance, repairs, and fuel as follows: Roadway EquipYr Materials Maint. Fuel1 100,000 10,000 5002 110,000 10,000 5003 115,000 10,000 5004 120,000 10,000 5255 125,000 10,000 5256 125,000 12,000 5257 120,000 12,000 5258 120,000 12,000 5509 110,000 14,000 55010 100,000 14,000 550Analyze the project using both the Net Present Value (NPV) method and the Internal Rate of Return (IRR) method.
Project: The streets and roads maintained by the government have not had an adequate maintenance program. The Public Works Department’s Civil Engineers have recommended the establishment of a dedicated team for the rapid and efficient accomplishment of the repair of potholes and other paving failures. The accomplishment of this recommendation is expected to require the services of a full-time, dedicated crew of four (4) field personnel: one (1) Crew Foreman and three (3) Maintenance Workers. The efforts of this group will be the constant execution of a job-order report from the Public Works Department’s current Road Inventory computer software’s Repair Report List. They will accomplish their scheduled work using an automated asphalt patching system for the repair of potholes in major roadways that will be purchased for this purpose. Purchase price estimated @ $175,000. The purchase price includes training of three (3) individuals in the operation and maintenance of the equipment. The cost of the crew’s year 1 annual salaries and benefits are expected to conform to the following schedule:
Position Individual Cost Total Cost
Supervisor 1 (1) $51,000 $51,000
Maintenance Worker II (3) $38,500 115,500
Total: $166,500
Note that salary & benefit costs can be expected to increase approximately 2.5% per year.
Presently, the annual budget for maintaining and refurbishing failing roadways is $750,000. This amount has historically (over the most recent 10 years) increased by an average 8% annually. The Public Works Engineers estimate that the proposed maintenance program will reduce that budgetary item’s cost annually by the following proportions:
Progr Cost
Year Reduction
1 7%
2 10%
3 10%
4 10%
5 8%
6 6%
7 4%
8 4%
9 3%
10 2%
The Public Works Engineers also estimate program operating costs for materials, equipment maintenance, repairs, and fuel as follows:
Roadway Equip
Yr Materials Maint. Fuel
1 100,000 10,000 500
2 110,000 10,000 500
3 115,000 10,000 500
4 120,000 10,000 525
5 125,000 10,000 525
6 125,000 12,000 525
7 120,000 12,000 525
8 120,000 12,000 550
9 110,000 14,000 550
10 100,000 14,000 550
Analyze the project using both the
Trending now
This is a popular solution!
Step by step
Solved in 8 steps with 4 images
