The city council of a fast growing city in the west of Canada is planning to construct a new tunnel to help improve the traffic flow in the city. Construction is to start in 2020 and is expected to last for four years at a cost of $16 million per year. After construction is completed, the regular cost of operation and maintenance is expected at $1 million for the first year, increasing by $80,000 per year thereafter. To help the city recover the construction cost, the tunnel will operate for the first 25 years as a toll way (till end of 2048). Expected return from toll fees is estimated at $8 million per year. Consider the present to be the end of 2018/beginning of 2019, the service life of the project to be till end of year 2058, and the interest rate to be 6%. a) Draw a cash flow diagram for this project. What is the Present Worth of the project? b) c) What is the Annual Worth of the project from 2018 till 2058? (Hint: make use of the PW calculated in part b)). d) Is it a good investment for the city to make?

The city council of a fast growing city in the west of Canada is planning to construct a new tunnel to help improve the traffic flow in the city. Construction is to start in 2020 and is expected to last for four years at a cost of $16 million per year. After construction is completed, the regular cost of operation and maintenance is expected at $1 million for the first year, increasing by $80,000 per year thereafter. To help the city recover the construction cost, the tunnel will operate for the first 25 years as a toll way (till end of 2048). Expected return from toll fees is estimated at $8 million per year. Consider the present to be the end of 2018/beginning of 2019, the service life of the project to be till end of year 2058, and the interest rate to be 6%. a) Draw a cash flow diagram for this project. What is the Present Worth of the project? b) c) What is the Annual Worth of the project from 2018 till 2058? (Hint: make use of the PW calculated in part b)). d) Is it a good investment for the city to make?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A bridge design firm is performing an economic analysis of two mutually exclusive designs for a highway overpass. The steel girder option has an initial cost of $2.27 million, and the concrete option has an initial cost of $2.46 million. Every 25 years, the steel bridge must be painted at a cost of $680,000, and all other maintenance costs are the same for both options. The steel bridge is expected to last 50 years, and concrete bridge is expected to last 75 years. Based on the shortest acceptable analysis period, determine the present worth of costs for the best option using an interest rate of 9%. Express your answer in $ to the nearest $10,000.
The gaming commission is introducing a new lottery game called Infinite Progresso. The winner of the Infinite Progresso jackpot will receive $600 at the end of January, $1,600 at the end of February, $2,600 at the end of March, and so on up to $11,600 at the end of December. At the beginning of the next year, the sequence repeats starting at $600 in January and ending at $11,600 in December. This annual sequence of payments repeats indefinitely. If the gaming commission expects to sell a minimum of 1,150,000 tickets, what is the minimum price they can charge for the tickets to break even, assuming the commission earns 3.00% /per/year/month on its investments and there is exactly one winning ticket?
The state of Glottamora has $300 million remaining in its budget for the current year. One alternative is to give Glottamorans a one-time tax rebate. Alternatively, two proposals have been made for state expenditures of these funds. The first proposed project is to invest in a new power plant, costing $300 million and having an expected useful life of 20 years. Projected benefits of the new power plant are as follows: Years Benefits per Year ($ Millions) 1 - 5 0 6 - 20 60 The second alternative is to undertake a job retraining program, also costing $100 million and generating the following benefits: Years Benefits per Year ($ Millions) 1 - 5 60 6 - 10 42 11 - 20 12 The state Power Department argues that a 5 percent discount factor should be used in evaluating the projects because that is the government’s borrowing rate. The Human Resources Department suggests using a 12 percent rate because that more nearly equals society’s true…
The Logan Well Services Group is considering two sites for storage and recovery of reclaimed water. The mountain site (MS) will use injection wells that cost $4.2 million to develop and $280,000 per year for M&O. This site will be able to accommodate 150 million gallons per year. The valley site (VS) will involve recharge basins that cost $11 million to construct and $400,000 per year to operate and maintain. At this site, 720 million gallons can be injected each year. If the value of the injected water is $3.00 per thousand gallons, which alternative, if either, should be selected according to the B/C ratio method? Use an interest rate of 8% per year and a 20-year study period. The B/C ratio is . Select alternative (Click to select) neither of the alternatives mountain site valley site .
The gaming commission is introducing a new lottery game called Infinite Progresso. The winner of the Infinite Progresso jackpot will receive $900 at the end of January, $1,800 at the end of February, $2,700 at the end of March, and so on up to $10,800 at the end of December. At the beginning of the next year, the sequence repeats starting at $900 in January and ending at $10,800 in December. This annual sequence of payments repeats indefinitely. If the gaming commission expects to sell a minimum of 1,200,000 tickets, what is the minimum price they can charge for the tickets to break even, assuming the commission earns 9.00 % / year on its investments and there is exactly one winning ticket? $ Do all calculations to 5 decimal places and round final answer to 2 decimal places. Tolerance is +$0.03.
The consultancy Imagination Inc. is working with its manufacturing client Parts-R-Us to improve their on-time performance. The firm can earn a bonus of up to $1,000,000 based on how much the on-time performance actually improves. It's current (baseline) on-time performance is 90%. The company typically completes approximately 1,000 orders per month, with approximately 100 orders delayed. The bonus payment is prorated according to the following criteria: · The on-time performance improvement is calculated based on a reduction in late events or an improvement in on-time performance. · No bonus is earned for the first 25% reduction in late events, say from 100 to 75. Maximum bonus is earned once Parts-R-Us achieves 95% on-time performance. Please answer the following: Write down a formula to determine the total bonus amount to be received Using your formula, show how much bonus would be paid if Parts-R-Us achieves 94% on-time performance.
A 50-kilowatt gas turbine has an investment cost of $35,000. It costs another $15,000 for shipping, insurance, site preparation, fuel lines, and fuel storage tanks. The operation and maintenance expense for this turbine is $500 per year. Additionally, the hourly fuel expense for running the turbine is $7.00 per hour, and the turbine is expected to operate 3,500 hours each year. The cost of dismantling and disposing of the turbine at the end of its 6-year life is $9,000. a. If the MARR is 16% per year, what is the annual equivalent life-cycle cost of the gas turbine? b. What percent of annual life-cycle cost is related to fuel? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 16% per year. a. The annual equivalent life-cycle cost of the gas turbine is $ (Round to the nearest dollar.)
Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $380 million. The annual upkeep is expected to amount to $730,000. The turf will have to be replaced every 10 years at a cost of $820,000. Painting every 9 years will cost $76,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i= 10% per year? The estimated capitalized cost is $
A bridge design firm is performing an economic analysis of two mutually exclusive designs for a highway overpass. The steel girder option has an initial cost of $2.26 million, and the concrete option has an initial cost of $2.33 million. Every 25 years, the steel bridge must be painted at a cost of $560,000, and all other maintenance costs are the same for both options. The steel bridge is expected to last 50 years, and concrete bridge is expected to last 75 years. Based on the shortest acceptable analysis period, determine the present worth of costs for the best option using an interest rate of 7%. Express your answer in $ to the nearest $10,000.
Please provide the complete solution What is the value of a perpetuity of P100 per year if the discount rate is 5% and the cash flows donot begin until two years from now? Answer: P = P1,814.05
A relocation of a short stretch of rural highway feeding into Route 390 northwest of Dallas is to be made to accommodate new growth. The existing road is now unsafe, and improving it is not an alternative. Alternate new route locations are designated as East and West. The initial investment by government highway agencies will be $4,000,000 for East and $5,125,000 for West. Annual highway maintenance costs will be $120,000 for East and $90,000 for the shorter location West. Relevant annual road user costs, considering vehicle operation, time en route, fuel, safety, mileage, and so on, are estimated as $880,000 for East and only $730,000 for West. Assume a 20-year service life and i-7% Part a What is the present worth of the benefits and costs of route West over route East? PW benefits of route West over route East: $ PW costs of route West over route East: $
Question 3 Consider a proposal to enhance production of tortillas en a taqueria. The new machine is estimated to cost $33 million and will incur an additional $1.5 million per year in maintenance costs. The machine will produce annual savings of $4.5 million each year. The Minimum acceptable rate of return (MARR) is 8.5% per year, and the study period is five years at which time the machine will be obsolete (worthless). What is the maximum (minimum) percentage of initial investmet change that reverse your decision?