Question

David Rauschle, Office Manager for Continental Engineering has asked you to estimate the proposed cost of a channel stabilization project along the North Fork of the Forked Deer River in Dyer County, Tennessee. The following table lists the completed construction costs of several similar sites. Site Site Location Year Completed Construction Cost A 0.4 miles South of U.S. 412 1999 $2.0 Million B 0.2 miles east of Nash Creek 2005 $1.85 Million C South End of Harrison Road 2012 $2.95 Million Assume that construction costs for these types of projects increase by 3% per year. Using the completed construction costs in the accompanying table, compute the 2 anticipated cost of a new project that will be completed in 2018. Assume that you can simply average the projected costs of each site to determine the anticipated cost of the new project.

Answer 1

Answer:
	The project cost:
	Year	Miles	Description of the Project	Cost
	1999	0.4 miles	South of US 412	2 Million
	2005	0.2 miles	East of Nash Creek	1.85 Million
	2012		Sounth End of Harrison Road	2.95 Million
	The cost is increased @ 3% per year
	So the cost of South of US 412 = [2*(1.03)^19] = $ 3.51 Million
	So the cost of East of Nash Creek = [2*(1.03)^19] = $ 2.72 Million
	So the cost of South End of Harrison Road = [2.95*(1.03)^06] = $ 3.52 Million
	So the estimated cost of the project is the simple average of these 3 cost.
	The estimated project cost at the end of 2018 = $(3.51+2.72+3.52)/3 = $3.25 Million