Use spreadsheet analysis and a discount rate of 4% per year to determine if either port should be constructed.

9.25 A country with rapid economic expansion has contracted for an economic evaluation of possibly building a new container port to augment the current port. The west coast site has deeper water so the dredging cost is lower than that for the east coast site. Also, the redredging of the west site will be required only every 6 years while the east site must be reworked each 4 years. Redredging, which is expected to increase in cost by 10% each time, will not take place in the last year of a ports commercial life. Disbenefit estimates vary from west (fishing revenue loss) to east (fishing and resort revenue losses). Fees to shippers per 20-foot STD equivalent are expected to be higher at the west site due to greater difficulty in handling ships because of the ocean currents present in the area and a higher cost of labor in this area of the country. All estimates are summarized below in $1 million, except annual revenue and life.

Use spreadsheet analysis and a discount rate of 4% per year to determine if either port should be constructed.

It is not necessary that the country build either port since one is already operating successfully.

West Coast Site East Coast Site 21 0 5 8 8 12 1.5 0.8 Initial cost. S Year 0 Year 1 Dredging cost. $. year 0 Annual M&O, $/year Recurring dredging cost, $ Annual disbenefits. $/year Annual fees: number of 20-foot STD at $/container Commercial life. years 2 each 6 years with increase of 10% each time 4 1.2 each 4 years with increase of 10% each time 7 5 million/year at $2.50 each 8 million/year at $2 cach 20 12 West Coast Site East Coast Site 21 0 5 8 8 12 1.5 0.8 Initial cost. S Year 0 Year 1 Dredging cost. $. year 0 Annual M&O, $/year Recurring dredging cost, $ Annual disbenefits. $/year Annual fees: number of 20-foot STD at $/container Commercial life. years 2 each 6 years with increase of 10% each time 4 1.2 each 4 years with increase of 10% each time 7 5 million/year at $2.50 each 8 million/year at $2 cach 20 12