Question

You have four choices. A) To build a “stainless-steel” bridge that will cost you $5 million and last 120 years; or, B) build a regular steel bridge that needs to be replaced after 60 years and today would cost you $4 million and then (in 2020-$) another $4 million in 60 years, or C) build a wooden bridge that costs $3 million and need to be replaced every 20 years (i.e., replaced 5 times to last 120 years) (every time at the same cost in fixed Dollars) or D) put in a wooden bridge today for $3 million now and then replace that with a composite bridge in 20 years assuming the composite bridge at that time will cost $4.5 million in 2020-$ and have an expected life of 100 years. Use a discount rate of 6% and rank all four alternatives from the most economical to the least economical. Do not take user costs into consideration (e.g. interruption of use during replacements).

Answer 1