The National Government is planning to construct a bridge. At present a 4-lane bridge will be built, but it is expected that at a later date a second 4-lane bridge will be added. If an8-lane bridge can be built now, it will cost ₱8,100,000. A single 4-lane bridge can be built now for ₱5,500,00 . It is estimated that a second 4-lane bridge at a later date will cost ₱8,000,000. Annual upkeep on each 4-lane bridge will cost ₱91,500 and for the 8-lane bridge would be ₱115,000. Money to built the bridge will cost 12%. Assume a 50 year functional life for the project and determine the earliest time at which the additional 4-lanes would be required to make it equally economical to build the 8-lane bridge immediately.
The National Government is planning to construct a bridge. At present a 4-lane bridge will be built, but it is expected that at a later date a second 4-lane bridge will be added. If an8-lane bridge can be built now, it will cost ₱8,100,000. A single 4-lane bridge can be built now for ₱5,500,00 . It is estimated that a second 4-lane bridge at a later date will cost ₱8,000,000. Annual upkeep on each 4-lane bridge will cost ₱91,500 and for the 8-lane bridge would be ₱115,000. Money to built the bridge will cost 12%. Assume a 50 year functional life for the project and determine the earliest time at which the additional 4-lanes would be required to make it equally economical to build the 8-lane bridge immediately.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The National Government is planning to construct a bridge. At present a 4-lane bridge
will be built, but it is expected that at a later date a second 4-lane bridge will be added.
If an8-lane bridge can be built now, it will cost ₱8,100,000. A single 4-lane bridge can
be built now for ₱5,500,00 . It is estimated that a second 4-lane bridge at a later date
will cost ₱8,000,000. Annual upkeep on each 4-lane bridge will cost ₱91,500 and for the
8-lane bridge would be ₱115,000. Money to built the bridge will cost 12%. Assume a 50
year functional life for the project and determine the earliest time at which the additional
4-lanes would be required to make it equally economical to build the 8-lane bridge
immediately.
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