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The traffic engineer in a city of 80,000 people has been authorized to spend $10,000 per year at the end of each of the next
The traffic engineer in a city of 80,000 people has been authorized to spend $10,000 per year at the end of each of the next ten years for pavement markings. In addition, she has been authorized to spend lump sums of $20,000 and $30,000 at the end of years 4 and 8, respectively, for new traffic signs. Assume the compound interest is 8% per annum. What should the current budget be to cover these individual expenditures for the next 10 years? a) $ 87,620 b) $ 90,750 c) $ 98,010 d) $ 100,400 e) $ 103,680 A county engineer has a choice of paving with either type A pavement or type B pavement. Type A pavement has a life expectancy of 10 years, after which part of the material can be salvaged and reused. Type B pavement only lasts 5 years but is much less expensive. The prevailing interest rate is 10% (APR). Which is the better alternative? Type A $ 20,000 $ 1,000 10 yr $ 2,500 Type B $ 5,000 $ 2,000 Cost new Annual maintenance Estimated life Salvage value at end of life 5 yr $0
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