Question 3.2 A newly constructed bridge costs $ 32,000,000. The same bridge is estimated to need renovation every 20 years at a cost of $ 13,500,000. Annual repairs and maintenance are estimated to be $2,700,000 per year. (a) If the interest rate is 12%, determine the capitalized cost of the bridge. (b) Suppose that in (a), the bridge must be renovated every 25 years, not every 20 years. What is the capitalized cost of the bridge? (c) Repeat (a) and (b) with the interest rate of 16 %. What can you say about the effect of interest on the results.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
None
Question 3.2
A newly constructed bridge costs $ 32,000,000. The same bridge is
estimated to need renovation every 20 years at a cost of $ 13,500,000. Annual repairs and
maintenance are estimated to be $2,700,000 per year.
(a) If the interest rate is 12%, determine the capitalized cost of the bridge.
(b) Suppose that in (a), the bridge must be renovated every 25 years, not every 20 years.
What is the capitalized cost of the bridge?
(c) Repeat (a) and (b) with the interest rate of 16 %. What can you say about the effect of
interest on the results.
Transcribed Image Text:Question 3.2 A newly constructed bridge costs $ 32,000,000. The same bridge is estimated to need renovation every 20 years at a cost of $ 13,500,000. Annual repairs and maintenance are estimated to be $2,700,000 per year. (a) If the interest rate is 12%, determine the capitalized cost of the bridge. (b) Suppose that in (a), the bridge must be renovated every 25 years, not every 20 years. What is the capitalized cost of the bridge? (c) Repeat (a) and (b) with the interest rate of 16 %. What can you say about the effect of interest on the results.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education