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You are the Town Engineer for Pleasantville USA. Pleasantville needs to repave its Main Street. A concrete paving would cost 5,000,000 up front. It would
- You are the Town Engineer for Pleasantville USA. Pleasantville needs to repave its Main Street. A concrete paving would cost 5,000,000 up front. It would have maintenance costs of $100,000 per year for each of its 40 year lifespan. There is also a 35% chance of a one time special maintenance of $1,000,000 in year 15 and a 60% chance of a one time special maintenance of $1,000,000 in year 30. A bituminous paving would cost $3,500,000 up front. Maintenance would be $150,000 per year for each of the 15 years of its lifespan. I also would have a 80% chance of a one time special maintenance of 1,000,000 in year 8. There are no salvage costs associated with either project. You have been asked to inform the town council which method of paving is less expensive considering that town is raising the money by issuing bonds paying 8% interest. If the town had the money in cash waiting for the project and didnt need to borrow any, would your analysis change in any way?
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