Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Steel Design The steel bridge is estimated to cost $20,000,000 now with a salvage value of $3,000,000 at the end of its 20 years. Maintenance

image text in transcribed

Steel Design The steel bridge is estimated to cost $20,000,000 now with a salvage value of $3,000,000 at the end of its 20 years. Maintenance costs on the steel bridge are estimated at $100,000 per year for the first 3 years, and then increase by $20,000 per year for the next 17 years (i.e. $120,000 in the fourth year, $140,000 in the fifth year, etc.). Concrete Design The concrete bridge is estimated to cost $17,000,000 with a negative salvage value of $2,000,000 (demolition cost). Maintenance costs on the concrete bridge are estimated at $200,000 per year for the full 20 year life of the bridge. Questions (a) Using an effective annual interest rate of 7%, compute the present worth and the equiv- alent uniform annual cos for both of the options. (b) Which of these two options is economically most attractive? (c) Holding everything else fixed (as given in the original problem statement), what effective annual interest rate would make these two options economically equivalent? Steel Design The steel bridge is estimated to cost $20,000,000 now with a salvage value of $3,000,000 at the end of its 20 years. Maintenance costs on the steel bridge are estimated at $100,000 per year for the first 3 years, and then increase by $20,000 per year for the next 17 years (i.e. $120,000 in the fourth year, $140,000 in the fifth year, etc.). Concrete Design The concrete bridge is estimated to cost $17,000,000 with a negative salvage value of $2,000,000 (demolition cost). Maintenance costs on the concrete bridge are estimated at $200,000 per year for the full 20 year life of the bridge. Questions (a) Using an effective annual interest rate of 7%, compute the present worth and the equiv- alent uniform annual cos for both of the options. (b) Which of these two options is economically most attractive? (c) Holding everything else fixed (as given in the original problem statement), what effective annual interest rate would make these two options economically equivalent

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Risk Management And Financial Institutions

Authors: John C. Hull

3rd Edition

1118269039, 9781118269039

More Books

Students also viewed these Finance questions

Question

Id probably just get more upset. Its bett er to just drop it.

Answered: 1 week ago