Repair or replace a existing toll bridge? Alternative A: Spend $100,000 to fix it now and also spend $10,000 each year for 10 years to maintain it. Then spend $500,000 to rebuild it at EOY 10. Alternative B: Spend $500,000 right now to rebuild it. The new bridge only costs $5000 per year to maintain whether built now or later. Which alternative has the least cost PW using a MARR of 6 %? Note: Both options are identical after 10 years.
Repair or replace a existing toll bridge? Alternative A: Spend $100,000 to fix it now and also spend $10,000 each year for 10 years to maintain it. Then spend $500,000 to rebuild it at EOY 10. Alternative B: Spend $500,000 right now to rebuild it. The new bridge only costs $5000 per year to maintain whether built now or later. Which alternative has the least cost PW using a MARR of 6 %? Note: Both options are identical after 10 years.
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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100%
Do not use excel please. Show equations used.
Transcribed Image Text:Notes: Every MARR is given as an effective annual rate unless stated otherwise. Show each rate of
return as a percentage with 2 decimal places such as 6.37%. You may round off all PW, AW, or FW
values to the nearest dollar.
Transcribed Image Text:Repair or replace a existing toll bridge? Alternative A: Spend $100,000 to fix it now and also
spend $10,000 each year for 10 years to maintain it. Then spend $500,000 to rebuild it at EOY 10.
Alternative B: Spend $500,000 right now to rebuild it. The new bridge only costs $5000 per year to
maintain whether built now or later. Which alternative has the least cost PW using a MARR of 6 %?
Note: Both options are identical after 10 years.
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