Question

A bridge design firm is performing an economic analysis of two mutually exclusive designs for a...

A bridge design firm is performing an economic analysis of two mutually exclusive designs for a highway overpass. The steel girder option has an initial cost of $2.04 million, and the concrete option has an initial cost of $2.5 million. Every 25 years, the steel bridge must be painted at a cost of $450,000, and all other maintenance costs are the same for both options. The steel bridge is expected to last 50 years, and concrete bridge is expected to last 75 years. Based on the shortest acceptable analysis period, determine the present worth of costs for the best option using an interest rate of 9%. Express your answer in $ to the nearest $10,000.

Answer: 2120701.0

Homework Answers

Answer #1

Analysis period chosen = 150 years (LCM of lives of both types of bridges)

i = 9%

Steel bridge:

It would be replaced at the same cost after 50 years and 100 years (cost of painting is incurred in years 25, 75 and 125)

PW (cost) = 2040000 + 450000/1.0925 +  2040000/1.0950 + 450000/1.0975​ +  2040000/1.09100+ 450000/1.09125

PW = $ 2120701

Concrete bridge:

It would be replaced at the same cost after 75 years

PW (cost) = 2500000 + 2500000/1.0975

PW = $ 2503899

Best option: Steel girder bridge

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A bridge design firm is performing an economic analysis of two mutually exclusive designs for a...
A bridge design firm is performing an economic analysis of two mutually exclusive designs for a highway overpass. The steel girder option has an initial cost of $2.04 million, and the concrete option has an initial cost of $2.5 million. Every 25 years, the steel bridge must be painted at a cost of $450,000, and all other maintenance costs are the same for both options. The steel bridge is expected to last 50 years, and concrete bridge is expected to...
A bridge design firm is performing an economic analysis of two mutually exclusive designs for a...
A bridge design firm is performing an economic analysis of two mutually exclusive designs for a highway overpass. The steel girder option has an initial cost of $2.04 million, and the concrete option has an initial cost of $2.52 million. Every 25 years, the steel bridge must be painted at a cost of $790,000, and all other maintenance costs are the same for both options. The steel bridge is expected to last 50 years, and concrete bridge is expected to...
Two sites are currently under consideration for a bridge to cross the Nile River at Elmansoura...
Two sites are currently under consideration for a bridge to cross the Nile River at Elmansoura city, Dakahlia. The first alternative, Suspension bridge, would have a first cost of L.E 30 million with annual maintenance costs of L.E. 15,000. In addition, the concrete deck would have to be resurfaced every 10 years at a cost of L.E. 50,000. The second alternative, Truss Bridge and approach roads, are expected to cost L.E 12 million and have annual maintenance costs of L.E....
Two bridge designs have been proposed for the new interstate highway to cross Rio de Lubbock....
Two bridge designs have been proposed for the new interstate highway to cross Rio de Lubbock. A bridge constructed from wood will cost $6,000 (mucho Rio!) with a useful life of eight years. A bridge constructed from steel will cost $11,000 with a useful life of twenty years. Neither bridge will have any salvage value at the end of its life. Use annual worth analysis with an interest rate of 8% to determine which design should be chosen. Uniform annual...
Haley’s Crockett Designs Inc. is considering two mutually exclusive projects. Both projects require an initial investment...
Haley’s Crockett Designs Inc. is considering two mutually exclusive projects. Both projects require an initial investment of $11,000 and are typical average-risk projects for the firm. Project A has an expected life of 2 years with after-tax cash inflows of $8,000 and $10,000 at the end of Years 1 and 2, respectively. Project B has an expected life of 4 years with after-tax cash inflows of $8,000 at the end of each of the next 4 years. The firm’s WACC...
A firm needs to decide between two mutually exclusive projects. Project Alpha requires an initial investment...
A firm needs to decide between two mutually exclusive projects. Project Alpha requires an initial investment of $37,000 today and is expected to generate cash flows of $31,000 for the next 4 years. Project Beta requires an initial investment of $92,000 and is expected to generate cash flows of $36,400 for the next 8 years. The cost of capital is 10%. The projects can be repeated with no change in cash flows. What is the NPV of the project that...
18) a firm needs to decide between two mutually exclusive projects. Porject Alpha requires an initial...
18) a firm needs to decide between two mutually exclusive projects. Porject Alpha requires an initial investment of $29,000 today and is expected to generate cash flow of $43,000 for the next 3 years. Project Beta requires an initial investment of $60,000 and is expected to generate cash flows of $45,000 for the next 6 years. The cost of capital is 11%. The projects can be repeated with no change in cash flows. What is the NPV of the project...
A firm needs to decide between two mutually exclusive projects. Project Alpha requires an initial investment...
A firm needs to decide between two mutually exclusive projects. Project Alpha requires an initial investment of 50,000 today and is expected to generate cash flows of 51,000 for the next 3 years. Project Beta requires an intial investment of 85,000 and is expected to generate cash flows of 49,700 for the next 6 years. The cost of capital is 6%. The projects can be repeated with no charge in cash flows. What is the NPV of the project that...
Firm BCD has the opportunity to invest in one of two mutually exclusive machines, which can...
Firm BCD has the opportunity to invest in one of two mutually exclusive machines, which can both produce the same product. Machine A has a life of 9 years, costs $12 million and will produce after-tax inflows of $2.5 million per year at the end of each year. Machine B has a life of 7 years, costs $15 million and will produce after-tax inflows of $3.5 million per year at the end of each year. Assuming that the machines can...
The Perez Company has the opportunity to invest in one of two mutually exclusive machines that...
The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $10 million but realizes after-tax inflows of $4 million per y The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $10 million but realizes after-tax inflows of $4 million...