There are a number of reasons for not paving a rural road, including low traffic volume, property owners who do not want it paved, speed control, and political issues. On the other hand, paved roads have lower road-user operating costs and are less costly to maintain. In Washington County, a report prepared by the county engineer showed that the construction cost for a stabilized gravel road that will last 3 years is $1,025,000, with a maintenance cost of $355,000 per year. A bituminous road will cost $3,525,000, but it will last for 10 years. Use i = 8% per year. (a) At what maintenance cost per year (for the bituminous road) will the equivalent annual costs of the two roads be the same? (b) If the road is not paved and the annual maintenance cost of the stabilized gravel surface is actually 30% per year higher than estimated, how many years must this surface last for the two to break even, assuming the paved road maintenance would be the breakeven value determined above? Answer these questions using manual and spreadsheet solution, as your instructor requests.
There are a number of reasons for not paving a
rural road, including low traffic volume, property
owners who do not want it paved, speed control,
and political issues. On the other hand, paved
roads have lower road-user operating costs and
are less costly to maintain. In Washington County,
a report prepared by the county engineer showed
that the construction cost for a stabilized gravel
road that will last 3 years is $1,025,000, with a
maintenance cost of $355,000 per year. A bituminous
road will cost $3,525,000, but it will last for
10 years. Use i = 8% per year. (a) At what maintenance
cost per year (for the bituminous road)
will the equivalent annual costs of the two roads
be the same? (b) If the road is not paved and the
annual maintenance cost of the stabilized gravel
surface is actually 30% per year higher than estimated,
how many years must this surface last for
the two to break even, assuming the paved road
maintenance would be the breakeven value determined
above? Answer these questions using manual
and spreadsheet solution, as your instructor
requests.
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