USAA is considering adding a new runway and has 3 options for the runway surface: asphalt, concrete, and a mixture of both. The benefit from all 3 alternatives is the same. Therefore, these projects are cost-based alternatives, and the cash flows are provided in the table below. Using conventional benefit/cost ratio with MARR of 9%, which alternative should be selected? First cost AW of resurfacing cost Asphalt Concrete Mixture $250,000,000 $350,000,000 $400,000,000 $30,000,000 $20,000,000 $10,000,000 Disbenefits at construction time $5,000,000 Life, years Asphalt is better Concrete is better The Mixture is better 20 $10,000,000 20 $12,000,000 20
USAA is considering adding a new runway and has 3 options for the runway surface: asphalt, concrete, and a mixture of both. The benefit from all 3 alternatives is the same. Therefore, these projects are cost-based alternatives, and the cash flows are provided in the table below. Using conventional benefit/cost ratio with MARR of 9%, which alternative should be selected? First cost AW of resurfacing cost Asphalt Concrete Mixture $250,000,000 $350,000,000 $400,000,000 $30,000,000 $20,000,000 $10,000,000 Disbenefits at construction time $5,000,000 Life, years Asphalt is better Concrete is better The Mixture is better 20 $10,000,000 20 $12,000,000 20
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:USAA is considering adding a new runway and has 3 options for the runway surface: asphalt,
concrete, and a mixture of both. The benefit from all 3 alternatives is the same. Therefore, these
projects are cost-based alternatives, and the cash flows are provided in the table below. Using
conventional benefit/cost ratio with MARR of 9%, which alternative should be selected?
First cost
AW of resurfacing cost
Asphalt
Concrete
Mixture
$250,000,000 $350,000,000 $400,000,000
$30,000,000 $20,000,000 $10,000,000
Disbenefits at construction time
$5,000,000
Life, years
Asphalt is better
Concrete is better
The Mixture is better
20
$10,000,000
20
$12,000,000
20
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