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A city needs a new pedestrian bridge over a local stream. The city uses an interest rate of 5%, and the project life is 30
A city needs a new pedestrian bridge over a local stream. The city uses an interest rate of 5%, and the project life is 30 years. The following data (in millions of dollars) summarizes the bids that were received.
Bid A | Bid B | |
Construction Material Cost | 4.20 | 6.20 |
Construction Labor Costs | 0.60 | 0.70 |
Construction Overhead Costs | 0.35 | 0.03 |
Initial Admin and Legal Costs | 0.60 | 0.01 |
Annual Operating Costs | 0.05 | 0.075 |
Annual Revenue from Operation | ? | 0.40 |
Other Annual Benefits to the city | 0.22 | 0.25 |
What would the annual revenue of Bid A have to be for the two projects to be equivalent?
a) 0.10
b) 0.20
c) 0.30
d) 0.40
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