The town council of Cato Springs is considering two alternative investments to upgrade and expand its spring-fed recreational area.The two investment alternatives (A and B) have different costs and will produce different public benefits. The projected costs andbenefits over a 10-year planning horizon for the two alternatives are given below. Using a MARR of 7.0%, which, if either, of thealternatives should be pursued by the Cato Springs city council?CF (Benefits for AltA)CF (Benefits for AltEOYCF (Costs for Alt A)CF (Costs for Alt B)B)$7,590,000$10,310,0001$2,240,000$1,400,000$3,360,000$2,200,000$400,000$2,596,000$600,000$3,755,000$600,000$3,003,600$800,000$4,056,6004$800,000$3,446,100$1,000,000$4,377,3005$1,000,000$3,651,400$1,200,000$4,624,800$1,200,000$3,876,600$1,400,000$4,949,8007$1,400,000$4,135,700$1,600,000$5,365,6008$1,600,000$4,506,400$1,800,000$5,649,6009$1,800,000$5,458,900$2,000,000$6,252,30010$2,000,000$6,987,400$2,200,000$10,850,200Determine and rank the present worth of the costs for the alternatives.Click here to access the TVM Factor Table calculator.Alternative A's PW(C) = $Alternative B's PW(C) = $Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is +100.has a smaller present worth of costs, so it should be denoted Alternative 1. Respectively,has ahigher present worth of costs and should be denoted Alternative 2. Assume that "Do nothing" is Alternative 0.Calculate the ratios of present worth of benefits to present worth of costs for each pair of alternatives.Incremental InvestmentIncremental B/CAlternative to be selected1-0Carry all interim calculations to 5 decimal places and then round your final answers to 3 decimal places. The tolerance is ±0.005.Based on the results above, which, if either, of the alternatives should be pursued by the Cato Springs city council?v should be recommended.2.

Given, Two Alternatives : A and B to upgrade and expand the spring fed recreational area Time…

Answered: The town council of Cato Springs is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The construction cost of the bypass is $20 million, and $500,000 would be required each year for annual maintenance. The annual benefits to the public have been estimated to be $2.7 million. If the study period is 50 years and the state’s interest rate is 8% per year, should the bypass be constructed?
The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be required each year for maintenance. The annual benefits to the project have been estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR is set at 12%. a. What is the discounted payback period(in years)? b. Detemine whether this is a good investment using Modified Benefit-Cost Ratio method with Present Worth(PW). c. Using Conventional Benefit-Cost Ratio method with PW but the MARR is set at 12%, is this project acceptable?
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…
A bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road will justify a two-lane road and a bridge at the present time. Because of uncertainty regarding future use of the road, the time at which an extra two lanes will be required is currently being studied. The two-lane bridge will cost $220,000 and the four-lane bridge, if built initially, will cost $440,000. The future cost of widening a two-lane bridge to four lanes will be an extra $220,000 plus $23,000 for every year that widening is delayed. The MARR used by the highway department is 12% per year. The following estimates have been made of the times at which the four-lane bridge will be required: Pessimistic estimate Most likely estimate Optimistic estimate In view of these estimates, what would you recommend? List some advantages and disadvantages of this method of preparing estimates. 4 years 6 years 7 years A Click the icon to view the interest and annuity table…
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 .
Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 12% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods. Design Y a. Based on PW method, Design is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design Investment cost Annual revenue Annual cost Useful life Salvage value (Round to two decimal places) (Round to two decimal places) d. The discounted payback period of Design Y is The discounted payback period of Design Z is Net PW is is more economical years (Round to one decimal place) years (Round to one decimal place) $140,000 $51,725 $9,672 15 years $14,700 $149,103 Design Z $275,000 $84,946 $18,059 15 years $33,000 $186,587 Therefore, based on…
A new bridge is being planned. The construction cost of the bridge is $1.9M and annual opkeep is estimated to be $25K. Also, major maintenance work is anticipated every eight years at a cost of $350K per occurrence. The town governnent's MARR ia 99% per year. If the bridge has an expected life of 50 years, what is the capitalized worth (CW) of the bridge over a 100-year study period?
explain please
Two traffic signal systems are being considered for an intersection. One system costs $31,000 for installation and has an efficiency rating of 80%, requires 26 kW power (output), incurs a user cost of $0.23 per vehicle, and has a life of 9 years. A second system costs $47,000 to install, has an efficiency rating of 87%, requires 34 kW power (output), has a user cost of $0.19 per vehicle, and has a life of 17 years. Annual maintenance costs are $75 and $95, respectively. MARR = 8% per year. How many vehicles must use the intersection to justify the second system when electricity costs $0.09/kWh? Assume salvage value for each system equals zero. Project the difference in the user cost as savings for the second system. There are approximately 8,760 hours/year. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 8% per year. At least 108000 vehicles per day must use the intersection to justify the second system. (Round up to the nearest whole…
A bridge is to be constructed now as part of a new road. Engineers have determined that current traffic volume on the new road will justify a two-lane road and a bridge at the present time. Because of the uncertainty regarding future traffic, the time at which the additional two lanes will be required is currently being studied. Two alternatives are being considered. Alternative 1 - One-stage construction: Build a four lane bridge right now for $360,000. Alternative 2 - Two-stage construction: Start with a two-lane bridge now for $170,000 and widen to four lanes later when traffic justifies. The future cost of widening the bridge to four-lanes at that time will be $170,000 plus an extra $23,000 for every year that widening is delayed. For example, if future widening is done at the end of year 7, the cost of widening at that time will be equal to $170,000 + 7x($23,000) = $331,000. The following estimates have been made of when widening to a four-lane bridge will be required: Pessimistic…
An economic evaluation of the following mutually exclusive alternatives is being conducted. Since they have different service lives, repeatability is assumed and an analysis period of 18 years is used. The MARR is 10%. Initial cost Annual revenues Service life (years) Alternative A $30,000 $15,000 6 Alternative B $120,000 $40,000 Answer the following two questions: (1) The net AW of Alternative B over the analysis period is (select the closest value) A. $60,837 B. $25,368 C. $10,737 D. $19,163 (2) The net PW of Alternative B over the analysis period is (select the closest value) A. $88,056 B. $208,056 C. $110,360 D. $157,164
Consider the following mutually exclusive alternatives: Alternative A Alternative B Capital investment $473,000 $1,114,000 Net annual receipts $104,100 $235,000 Both alternatives have a useful life of 20 years and no market value at that time. The MARR is 20 % per year. Determine the annual worth (AW) of the most profitable course of action. (Enter your answer as a number without the dollar sign.)

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